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Jobs Day

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What’s in Today’s Report:

  • Why Yesterday’s Employment Data was Bad for Stocks and Bonds
  • Answering a Question About the Bond Market

Futures are little changed ahead of the jobs report and following mixed European economic data.

EU HICP (their CPI) was disappointing on balance as the headline rose less than expected (9.2% vs. (E) 9.5%) but the more important Core HICP gained 5.2% vs. (E) 5.0%. This report partially refutes the encouraging inflation data from earlier this week.

Today focus will be on the Jobs Report and expectations are as follows:  Job Adds 200K, UE Rate 3.7%, Wages 0.4% m/m, 5.0% y/y.  If we get another solid number above 200k, expect more weakness in stocks and bonds as that will be viewed as “hawkish” data, while a job adds number close to 100k could spark a sharp rally, given yesterday’s declines.

The jobs report isn’t the only important economic report today, however, as the ISM Services Index (E: 55.0) is released later this morning.  Markets will want to see a moderation in both the headline and prices readings.

Finally, there are three Fed speakers today:  Cook (11:15 a.m. ET), Bostic (11:15 a.m. and 3:30 p.m. ET), and Barkin (12:15 p.m. ET).

Jobs Report Preview

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What’s in Today’s Report:

  • Jobs Report Preview
  • What Political Dysfunction Means for Markets (Not Now, But Later)

Futures are slightly higher following more signs of disinflation in the EU.

Euro Zone PPI fell more than expected (-0.9% vs. (E ) -0.5%) and that’s the third EU inflation statistic this week to imply inflation has peaked and is receding.

Politically, Rep. McCarthy failed to become Speaker again yesterday although he is expected to win eventually.

Focus today will be on economic data and the key reports are all employment related:  Challenger job cuts (Previous 76,835), ADP Employment Report (E: 145K) and Jobless Claims (E: 228K).  Again, markets want to see a moderation in this employment data so underwhelming reports will be embraced by the market.  Finally, we also have two Fed speakers, Bostic (9:20 a.m. ET) and Bullard (1:20 p.m. ET), but data will move markets more than Fed speak at this point.

Three Keys to a Bottom: Update

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What’s in Today’s Report:

  • Three Keys to a Bottom: Update
  • Weekly Economic Cheat Sheet – Jobs Report in Focus

U.S. equity futures have a tentative bid to start the new year today as tech stocks are outperforming amid a sharp pullback in Treasury yields.

Economically, China’s Manufacturing PMI fell to 49.0 in December from 49.4 in November while the U.K.’s Manufacturing PMI came in at 45.3 vs. (E) 44.7 last month. Both figures remained well below 50, in contraction territory, and that is seeing some of the recent hawkish central bank expectations unwind as we begin the new year.

Looking into today’s session, there are two economic reports to watch in the U.S., the Manufacturing PMI (E: 46.2) and Construction Spending (E: -0.4%).

Investors will be looking for data that points to a continued slowdown in growth but a more pronounced drop in price readings as that should help further ease hawkish policy expectations and allow the early but tentative risk-on money flows to continue.

There are no Fed officials scheduled to speak and no notable Treasury auctions today. That will leave investors focused on Treasuries as a continued drop in yields today should support a continued bid in tech stocks and equities more broadly as traders reposition into the new year.

 

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Updated Market Outlook: What’s the Next Positive Catalyst?

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What’s in Today’s Report:

  • Updated Market Outlook:  What’s the Next Positive Catalyst?
  • Weekly Economic Cheat Sheet:  Jobs Report Friday

Futures are sharply lower on unrest in China as protests erupted across the country following more COVID restrictions.

Over the weekend Chinese citizens protested in numerous cities following new COVID restrictions, as the Chinese government sticks to it’s “Zero COVID” policy.

Economically the only notable number was EU M3 (money suppled) and that rose 5.8% vs. (E) 6.1%.

Today there are no notable economic reports but there are two Fed speakers, Bullard (12:00 p.m. ET) and Williams (12:00 p.m. ET).  Bullard especially has produced some “tape bombs” with his commentary on rates and if he’s again hawkish (talking about 7% Fed Funds) expect that to add to the early losses.

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.

Tom Essaye Quoted in S&P Global Market Intelligence on October 7th, 2022

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US job growth slows in September as labor market cools

“This just reinforces to the Fed that they have to stay the course, there’s nothing in this report that will make the Fed think: ‘Oh gee, we need to alter our plan.” said Tom Essaye, a trader and publisher of The Sevens Report. Click here to read the full article.

Sevens Report Analysts Quoted in Yahoo on October 6th 2022.

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U.S. Stock Futures Slip as Investors Mull Fed Policy Path

“The key to tomorrow’s jobs report will be whether it keeps the hopes for a Fed pivot alive. If the jobs report is ‘Too Hot’ that kills the idea of a Fed pivot, and we should expect the S&P 500 to drop back towards levels where we ended the third quarter,” Sevens Report analysts said in a note. Click here to read the full article.

Jobs Day

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What’s in Today’s Report:

  • Jobs Day (Abbreviated Jobs Report Preview)
  • Why Price Controls Still Don’t Work

Futures are slightly lower as the looming jobs report helps offset soft economic data and disappointing earnings.

Economically, German Industrial Production, German Retail Sales, and Japanese Household spending all missed estimates.

On earnings, AMD became the latest widely held company to miss earnings, positing a material revenue shortfall.

Today focus will be on the Jobs Report and expectations are as follows: Job Adds: 250K, UE Rate 3.7%, Wages 0.3% m/m, 5.1% y/y.  If the numbers are in the lower end of the “Just Right” range that will spur more hopes of a Fed pivot between now and year-end, and stocks will likely rally.    Away from the jobs report there are also several Fed speakers including:  Williams (10:00 a.m. ET), Kashkari (11:00 a.m. ET) and Bostic (12:00 p.m. ET) but they shouldn’t move markets (expect them to be hawkish in tone but not say anything new).

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.

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.