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Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview

Futures are moderately higher on solid economic data and rising hope China could relax its “Zero COVID” policies.

The EU Composite PMI (47.3 vs. (E) 47.1) and UK Construction PMI (53.2 vs. (E) 50.5) both beat estimates, implying economic activity in Europe isn’t collapsing.

In China, an article in the South China Morning Post stated “big and substantive” changes looming for COVID policies.

Today focus will be on the Jobs Report and estimates are as follows:  Job Adds: 210K, UE Rate: 3.6%, Wages: 0.3% m/m, 4.7% y/y.  If markets can get an underwhelming number (say the low 100’s) that will be the first material sign the labor market is starting to deteriorate, and it could spark a rally in stocks as the Fed needs better balance in the labor market before they can “pivot.”

Away from the jobs report, we also have one Fed speaker, Collins at 10:00 a.m. ET but she shouldn’t move markets.

VIX History and the Current Bear Market

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What’s in Today’s Report:

  • A Look at VIX History and the Current Bear Market
  • Chart: 30-Yr Treasury Bonds Fall to New Lows

Stock futures are testing the 2022 lows this morning as global bond yields push multi-year highs amid renewed turmoil in the U.K.’s government bond market.

The BOE expanded its emergency bond-buying program overnight after Gilt yields spiked higher, with officials warning that market dysfunction is threatening the U.K.’s financial stability.

Economically, the NFIB Small Business Optimism Index came in at  92.1 vs. (E) 91.5 for September.

There are no additional economic reports today but there are two Fed officials scheduled to speak: Harker (11:30 a.m. ET) and Mester (12:00 p.m. ET).

Looking back to the bond markets, there is a 3-Yr Treasury Note auction at 1:00 p.m. ET and if the results are weak, sending yields higher, that would further pressure stocks today.

Bottom line is, turmoil in the U.K. Gilts market is once again sending global yields higher and weighing on risk assets and if we don’t see bond markets stabilize this morning, then expect stocks and other risk assets to remain under pressure today.

What’s Needed for Markets to Stabilize

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What’s in Today’s Report:

  • Bottom Line:  What’s Needed for Markets to Stabilize (It’s Not That Much)
  • Weekly Market Preview:  Can Bond Yields Fall Further?
  • Weekly Economic Cheat Sheet:  Jobs Report on Friday

Futures are slightly higher following some backtracking on the UK fiscal spending plan.

UK PM Truss has abandoned part of her spending/tax cut plan amidst market and political pressure as she will no longer eliminate the 45% top tax rate (this is a mild positive as GILT yields were slightly lower on the news).

Oil prices rallied 3% as markets expect a material production cut from OPEC+ at this week’s meeting.

Today focus will be on the ISM Manufacturing PMI (E: 52.0) and while the headline reading is important as always, the Prices index will also be closely watched.  If that index can decline below 50 it will be a strong signal that dis-inflation is starting to work its way into the economy (and that’s a good thing). There’s one Fed speakers today, Williams at 3:10 p.m. ET but he shouldn’t move markets.

Another Hawkish Surprise: What the Fed Decision Means for Markets

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What’s in Today’s Report:

  • Another Hawkish Surprise: What the Fed Decision Means for Markets

Futures are little changed as markets digested yet another hawkish Fed decision amidst more global rate hikes.

The overnight session was mostly quiet as investors digested the Fed rate hike while other global central banks raised rates (five separate central banks hiked rates overnight, as expected).

The Bank of Japan intervened in the currency markets for the first time since 1998, causing a 1% rally in the yen.

Today focus will be on the Bank of England Rate Decision (E: 50 bps hike) and on weekly Jobless Claims (E: 220K).  Fed Chair Powell again highlighted that the labor market is still much too tight, so markets need these jobless claims to start to rise towards 300k to prevent even further Fed tightening in the future.  The sooner the labor market returns to better balance, the sooner we get to “peak hawkishness.”

FOMC Preview

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What’s in Today’s Report:

  • FOMC Preview

Futures reversed from overnight gains and are now tracking EU markets lower following more very hot inflation data and an aggressive policy hike by the Riksbank.

In Europe, German PPI surged 7.9% vs. (E) 1.5% in August (45.8% vs. E: 37.2% y/y) while Sweden’s Riksbank raised rates by 100 bp vs. (E) 75 bp. Both developments are driving hawkish, risk-off money flows ahead of the Fed.

Today, focus will begin to shift to the Fed as the September FOMC Meeting begins however there is one report on the housing market that will get some attention when it is released mid-morning: Housing Starts (E: 1.440M) and Permits (E: 1.621M).

Beyond that one report, there is a 20-Yr Treasury Bond auction at 1:00 p.m. ET. The auction may not move markets today with the Fed looming but it will be worth watching because if it is weak like last week’s 3-Yr and 10-Yr auctions ahead of the CPI report, it could be forecasting a more hawkish than expected Fed decision Wednesday.

Why Stocks Dropped Again

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What’s in Today’s Report:

  • Why Stocks Dropped (Again)
  • A Question About Silver

Futures are sharply lower following a very negative earnings pre-announcement from FedEx (FDX).

FedEx (FDX) earnings were terrible as the company reported EPS of $4.37 vs. (E) $5.10 and guidance was even worse with estimates of $2.75 vs. (E) $5.46.  The company sited significant macro-economic deterioration and the CEO warned about a “worldwide recession.”

Economically results were mixed as Chinese data beat estimates while UK Retail Sales were soft (–5.4% vs. –3.9%).

Today focus will be on Consumer Sentiment (E: 59.9) and more specifically the five-year inflation expectations.  In August they were 2.9% and if they rise back above 3.0% that’ll only compound the damage from Tuesday’s CPI and push stocks lower, while a decline below 2.9% will help offset CPI and help support stocks (although I think it’d take a sharp from below 2.9% for stocks to fully erase these early losses).

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • EIA Analysis and Oil Update

Futures are solidly lower as negative China/COVID headlines and lackluster economic data weighed on markets.

Chinese authorities put the city of Chengdu (population 17 million) in a COVID lockdown, reminding markets “Zero COVID” is still in effect.

Economically, global manufacturing PMIs were underwhelming as all major regions (EU, UK and China) posted numbers below 50 (signaling contraction).

Today focus will be on economic data and the most important number is the ISM Manufacturing PMI (E: 52.2).  Markets need to see an in-line reading, because if it’s a very strong number that will increase hawkish concerns about the Fed, and if it’s a very weak number (below 50) that will spike stagflation concerns.  Outside of the PMI we also get Jobless Claims (E: 248K) and Unit Labor Costs (E: 10.7%) and there’s also one Fed speaker, Bostic at 3:30 p.m. ET.

A History of Fed Warnings

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What’s in Today’s Report:

  • A History of Fed Warnings
  • Chart: 10-Year Yield in a ”Broadening Triangle” Pattern

Stock futures are enjoying a solid oversold bounce this morning with both Treasury yields and the dollar index pulling back from their recent highs as Powell’s hawkish comments from Jackson Hole continue to be digested.

Eurozone Economic Sentiment dipped to 97.6 vs. (E) 97.7 this month, a 1.5 year low, but the soft survey data is seeing investors dial back some recent hawkish money flows.

Looking into today’s session, it will be a busy morning with two housing market data points due out before the bell: Case-Shiller Home Price Index (E: 1.1%) and FHFA House Price Index (E: 0.9%) before focus will shift to Consumer Confidence (E: 97.4) and JOLTS (10.4M) data at the top of the 10 a.m. hour ET.

Additionally, there are two Fed speakers to watch: Barkin (8:00 a.m. ET) and Williams (11:00 a.m. ET).

Bottom line, stocks became near-term oversold between Friday and yesterday and as long as the dollar and yields remain steady today, and economic data and Fed chatter doesn’t shift policy expectations any more hawkish than they have already repriced, stocks should be able to enjoy a bounce as traders begin to position into the end of the month.

On the charts, the 4,020 area will be a critical support level to watch in the S&P 500 today as a material break below would open the door to a swift drop into the low-to-mid 3,900s.

Why Is the Market Suddenly Resilient?

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What’s in Today’s Report:

  • Why Is the Market Suddenly Resilient?

Futures are slightly higher on momentum from yesterday’s recovery and despite mixed Chinese economic data.

Chinese Industrial Production and Fixed Asset Investment both slightly missed estimates while Retail Sales beat expectations, but importantly the data didn’t show the Chinese economy had lost significant momentum.

Today there are numerous economic reports and some of them potentially will move markets.  The most important report today is 5-Yr Inflation Expectations (3.1% previous) and if they drop to 3.0% or lower that will be a good sign on inflation.  Retail Sales (E: 0.9%) and Empire State Manufacturing Index (E: -1.3) are the next most important reports today and again markets will want to see moderation – a slowing of activity but not a collapse.  Finally, we also get Industrial Production (E: 0.1%) and Consumer Sentiment (E: 50.0).

We also have one Fed speaker today, Bostic (8:45 a.m. ET), and we’d expect him to follow yesterday’s script and push back on the inevitability of a 100 basis point hike (although acknowledge that anything’s possible depending on the data).

CPI Preview (Good, Bad & Ugly)

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What’s in Today’s Report:

  • CPI Preview (Good, Bad & Ugly)

Futures are modestly lower following more disappointing economic data from Europe and as the dollar again surged to fresh multi-decade highs.

The German ZEW Economic Sentiment Index collapsed, falling to –53.8 vs. (E) -38.0, adding to quickly rising recession worries in the EU.

The bad ZEW reading further weighed on the euro and boosted the dollar, which rose to another 20+ year high.

Today there are no notable economic reports and just one Fed speaker, Barkin at 12:30 p.m. ET.  So, like Monday, we’d expect positioning ahead of tomorrow’s CPI report and any potential COVID headlines from China to move markets (and if there’s a path of least resistance today, it’s lower into the CPI print).