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The market is very sensitive to soft labor market data

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The market is very sensitive to soft labor market data: Tom Essaye Quoted in MarketWatch

Revisions to U.S. jobs data due Wednesday have the potential to weigh on the stock market

The 12-month average for job additions over the revision period was 241,000 — a “very strong” figure that implies a solid labor market, noted Tom Essaye, founder of Sevens Report Research. A downward revision of 600,000 would drop the average payrolls gain to 191,000, while a downward revision of 1 million would make what’s been strong jobs data “more middling,” he wrote.

“This matters because the market is very sensitive to soft labor market data and we know that from the recent pop in jobless claims and July jobs report. So, while investors are ok ignoring most disappointing data, they aren’t ignoring soft labor market data and if these revisions are worse than expected, look for it to weigh on stocks today,” Essaye said.

Also, click here to view the full MarketWatch article published on August 21st, 2024. However, to see the Sevens Report’s full comments on the current market environment sign up here.

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Watch the BLS Revisions Today

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Watch the BLS Revisions Today: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Something to Watch Today: BLS Revisions
  • How a Fed Mistake Would Impact Commodities
  • VIX Expiration Poses Threat to Short-Volatility Trade – Chart

Futures are slightly higher as traders await job growth revisions from the BLS after a mostly quiet night of news.

Economically, Japanese trade data revealed a deeper than anticipated deficit in July but amid solid import/export growth numbers which importantly helped pause a rally in the yen and reduced pressure on risk assets overnight.

Looking into today’s session, there are no typical economic reports on the calendar, however, the BLS Revisions to Net Payroll Growth for the trailing 12-months through March 2024 will be released at 10:00 a.m. ET and a significant downward revision could rekindle the recession fears initially sparked by the July jobs report which would result in broad market volatility.

In the afternoon, there is a 20-Yr Bond auction at 1:00 p.m. ET which could move yields and influence equity markets before investor focus will turn to the release of the July FOMC Meeting Minutes at 2:00 p.m. ET.

Finally, earnings season continues to wind down but a few notable companies reporting today include: TGT ($2.17), TJX $0.92), ZM ($1.21).

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Updated Market Outlook

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What’s in Today’s Report:

  • Updated Market Outlook
  • Weekly Market Preview:  Will Powell Confirm A September Rate Cut?
  • Weekly Economic Cheat Sheet:  The First Big Number of August (and It Needs to be Goldilocks)

Futures are little changed following a very quiet weekend of news as investors look ahead to more growth data this week and Powell’s speech on Friday.

There was no notable economic data over the weekend or overnight.

Geopolitically, optimism is continuing to build towards a ceasefire between Israel and Hamas and that’s weighing on oil prices, although nothing formal has been announced.

Today there is only one economic number, Leading Indicators (E: -0.3%), and barring a big surprise that shouldn’t move markets.  There is also one Fed speaker, Waller (9:15 a.m. ET), and he is part of Fed leadership so if he strongly hints at a September rate cut, that should be a mild tailwind for stocks and bonds.

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The Right Way to Think About Economic Growth Right Now

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What’s in Today’s Report:

  • Hard Landing/Soft Landing Scoreboard (The Right Way to Think About the U.S. Economy)

Futures are slightly lower following a mostly quiet night of news as markets digest Thursday’s strong rally.

The only notable economic report overnight was UK retail sales, which rose 0.8% vs. (E) 0.5% and added to Thursday’s haul of solid global data.

Geo-politically, Israel/Hamas ceasefire talks continued and any breakthrough would be a surprise market positive.

Today there are a few notable economic reports including Consumer Sentiment (E: 67.0), 1-Yr Inflation Expectations: (E: 2.9%), 5-Yr. Inflation Expectations (E: 3.0%) and Housing Starts (1.342M).  However, those numbers aren’t that important to growth so barring a major surprise, they shouldn’t move markets and we should mostly see digestion of Thursday’s big rally.

There is also one Fed speaker today, Goolsbee (1:25 p.m. ET), and he’s dovish do don’t be surprised if he openly talks about cutting rates in September.

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Why Falling Inflation Won’t Help Stocks Anymore

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What’s in Today’s Report:

  • Why Falling Inflation Won’t Help Stocks Anymore
  • EIA Analysis and Oil Market Update

Futures are slightly higher thanks to better-than-expected tech earnings and despite mixed economic data.

CSCO posted solid earnings and that’s helping extend the tech sector bounce and boosting futures.

Economically, Chinese and UK data was more mixed than good and point to a modest slowing of global growth.

Economic growth is now the main fundamental driver of this market and today is full of important growth updates including, in order of importance: Retail Sales (E: 0.3%), Jobless Claims (E: 234K), Industrial Production (E: -0.1%), Philly Fed (E: 5.8),  Empire Manufacturing (-6.0) and Housing Market Index (E: 42).  In-line to slightly underwhelming economic data will be the “best case” for stocks in the near term as it increases 50 bps rate cut chances but doesn’t imply a dramatic growth slowdown.

There are also two Fed speakers today, Musalem (9:10 a.m. ET) and Harker (1:10 p.m. ET) and officials might start to be more explicit about a rate cut following Wednesday’s CPI (Atlanta Fed President Bostic said he was open to a cut in September overnight).

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Two “Smart Market” Recession Signals to Watch For

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Two “Smart Market” Recession Signals to Watch For: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Follow-Up Thoughts on the Yield Curve Reversion Process – Two Signals to Watch For
  • PPI Takeaways – Will Falling Inflation Flip from a Tailwind to a Headwind?
  • NFIB Small Business Optimism Index Echoes HD Sales Concerns

U.S. stock futures are flat as traders digest yesterday’s sizeable rally ahead of today’s critical CPI release.

Overseas, the Reserve Bank of New Zealand unexpectedly cut rates overnight citing recession concerns in H2’24 while the EU GDP Flash met estimates at 0.6% y/y helping push back on imminent recession fears.

Today, market focus will be on the key U.S. inflation data due ahead of the bell: CPI (E: 0.2% m/m, 3.0% y/y), Core CPI (E: 0.2% m/m, 3.2% y/y). A “cool” release will be welcomed and likely support an extension of the week-to-date gains while a “hot” print would be negative for risk assets.

There are no Fed speakers today, however there is a 4-Week Treasury Bill auction at 11:30 a.m. ET which normally wouldn’t pique investors interest, but this one lines up with the September Fed meeting and could shed light on the market’s policy rate expectations.

Finally, earnings season continues to wind down with a few noteworthy companies reporting today including: CAH (E: $1.72), UBS (E: $0.12), TCEHY (E: $0.61), CSCO (E: $0.85).

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CPI Preview: Good, Bad, Ugly

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CPI Preview: Good, Bad, Ugly: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • CPI Preview: Good, Bad, Ugly
  • Chart: 10-Yr Yield Falls to 52-Week Lows

Futures are flat this morning while overseas markets were mixed overnight with Europe underperforming amid soft economic data while Asian shares were mostly higher.

Economically, the August German ZEW Survey saw Current Conditions fall to -77.3 vs. (E) -74.5 and Economic Sentiment drop to 19.2 vs. (E) 34.5 which weighed on stocks and other risk assets.

Domestically, the NFIB Small Business Optimism Index rose to 93.7 vs. (E) 91.7 which eased recession fears and is helping U.S. equity futures relatively outperform ahead of the open.

Looking into today’s session, trader focus will be on the first inflation data of the week with PPI (E: 0.2% m/m, 2.6% y/y) and Core PPI (E: 0.2% m/m, 3.0% y/y) due out ahead of the bell.

There is also one Fed speaker: Bostic (1:15 p.m. ET) and one consumer-focused earnings release: HD (E: $4.55) to watch.

Bottom line, PPI could move markets today if there is a big surprise in the release, but markets are likely to remain in wait-and-see mode as investors await the more important CPI release tomorrow.

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How Worried Should We Be About This Market?

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What’s in Today’s Report:

  • How Worried Should We Be About This Market?
  • Weekly Market Preview:  Important Updates on Economic Growth and Earnings
  • Weekly Economic Cheat Sheet:  Stagflation or Not?  (CPI Wednesday, Retail Sales Thursday)

Futures are slightly higher following a quiet weekend of news as investors digested last week’s early swoon and strong rebound, ahead of important updates this week on inflation and economic growth.

Geo-political tensions remained elevated as the world waits for the Iran/Hezbollah retaliation on Israel and expectations for an attack any day remain high.

There was no notable economic overnight and investors’ focus is on Wednesday’s CPI and Thursday’s Retail Sales.

Today is a quiet day on the calendar as there are no notable economic reports and no important Fed speakers.  But, this week provides important updates on inflation and economic growth and the stakes are high:  If inflation cools further and growth is solid, stocks can extend the rally.  If inflation isn’t cool and growth disappoints, brace for stagflation worries (and more volatility).

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Semiconductors: Bull vs. Bear Case (Important for the Market)

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What’s in Today’s Report:

  • Semiconductors (SOX): Bull vs. Bear Case

Futures are modestly higher and are extending Thursday’s gains following a mostly quiet night of news.

Most of the early rally this morning is due to momentum from Thursday’s surge in stocks, but Taiwan Semiconductor (TMSC) also gave a positive July revenue update which is boosting tech/AI sentiment and supporting markets.

Geo-politically, a retaliatory attack from Hezbollah and/or Iran on Israel remains imminent and we shouldn’t be shocked if geo-political risks rise over the weekend.

Today there are no notable economic reports nor any Fed speakers so trading should be driven by technical factors and the yen, and as long as the yen doesn’t rally, stocks should be able to hold Thursday’s gains.

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Market Multiple Table: Chart

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Market Multiple Table: Chart: Start a free trial of The Sevens Report.

What’s in Today’s Report:

  • Market Multiple Table Chart (Scenario Targets Compress)
  • The Most Important Financial Asset in the World (Right Now)

Futures are slightly lower following a generally quiet night of news as markets digest Wednesday’s failed rally.

Japan remains at the center of global markets and the “Summary of Opinions” (think of it as the BOJ minutes) showed officials discussed further rate hikes but also that the BOJ is, for now, on hold (and that’s a mild positive).

Geopolitically, tensions between Israel and Iran/Hezbollah remain elevated and a retaliation is expected any day.

Today focus will be on Weekly Jobless Claims (E: 240K) and a better-than-expected number (so under 240k) will help incrementally ease slowdown fears.  Conversely, if claims jump above 250k, expect recession worries to rise further and stocks to react accordingly (lower).

There is also one Fed speaker, Barkin at 3:00 p.m. ET, but he shouldn’t move markets.

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