What’s in Today’s Report:
- How Bad Can It Get? Valuation Worst Case Scenario
Futures are sharply higher after China took further steps to support the economy while economic data was mixed.
China announced a 1% cut to bank reserve requirements and pledged to do more to support the economy. This announcement is the main reason stocks are bouncing back this morning.
Global composite PMIs were mixed as China beat estimates (52.2 vs. (E) 51.9) while the Euro Zone Composite PMI missed expectations (51.1 vs. (E) 51.3).
Today focus will be on two big events. First, the jobs report. Expectations are for 180K jobs adds, a 3.7% unemployment rate and a 3.0% annual wage increase. The best case number is a mild miss on all three metrics, so around 150kish jobs, 3.8% unemployment (or higher) and under 3.0% wages. The worst case scenario (a stagflation number) is a miss on jobs but firm unemployment and wages. If that happens, it’ll likely be another ugly day.
The other major event today is the Powell speech at 10:15 a.m. ET (he’ll be joined by Yellen and Bernanke). The key here is Powell changing his rhetoric to look more flexible on 1) rate increases and 2) balance sheet reduction. If he does that, especially with regards to the balance sheet, then stocks can extend this early rally.