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Jobs Day

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What’s in Today’s Report:

  • Jobs Day
  • Equity Risk Premium Part 2: Index Deep Dive

Futures are slightly higher following a night of generally solid earnings and no geopolitical surprises.

Earnings were good in aggregate overnight (MCHP, TWLO, TEAM all beat) and that’s helping futures to rally slightly.

Geopolitically, markets are still awaiting the details on a Hormuz deal, but fears of escalation remain low.

Today focus will be on the jobs report and estimates are as follows:  88K Job-Adds, 4.2% Unemployment Rate and 3.5% Wage Growth.  An in-line to slightly better than expected report with stable unemployment and wage growth is the best-case scenario for stocks, as it implies strong labor market but no additional inflation risk. If we get that outcome, it should help stocks rally.

The other notable events today are Consumer Credit (E: $10.5B) one Fed speaker, Barkin (10:00 a.m. ET), but he shouldn’t move markets.

 

Why Rising Treasury Yields Are a Headwind on Stocks

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What’s in Today’s Report:

  • What is Country Garden and Why Does It Matter?
  • Equity Risk Premium: Why Rising Bond Yields Are a Headwind on Stocks
  • Chart – Growth Stocks Approach Key 2023 Support

U.S. equity futures are tracking global markets lower this morning amid more negative news flow out of China while Treasury yields continue to test to cycle highs with the 10-Year Note yield above 4.20%.

Multiple Chinese economic reports badly missed estimates overnight with Retail Sales notably rising just 2.5% vs. (E) 4.2% in July.

The bad data and renewed concerns about the property market prompted surprise rate cuts by the PBOC but the policy action was seen as underwhelming by investors and markets traded with a decisive risk-off tone overnight.

Looking into today’s session, the headlines out of China will continue to influence money flows, however there are several key U.S. economic reports to watch this morning including: Retail Sales (E: 0.4%), Empire State Manufacturing Index (E: -0.4), Import & Export Price (E: 0.2%, 0.1%), and the Housing Market Index (E: 56).

Markets continue to look for “Goldilocks” dynamics in the data, consistent with easing growth, a loosening labor market, and continued drop in inflation. Anything that contradicts those trends could further risk assets including stocks today.

There is also one Fed speaker today: Kashkari (11:00 a.m. ET) but it is doubtful he wavers from the Fed’s narrative and is unlikely to move markets.