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What the Disappointing Jobs Report Means for Markets

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What’s in Today’s Report:

  • What the Disappointing Jobs Report Means for Markets
  • Weekly Market Preview:  Can the Goldilocks Setup Continue This Week?
  • Weekly Economic Cheat Sheet:  Key Inflation Data This Week

Futures are flat following a mostly quiet weekend of news as markets digested Friday’s jobs report, which was a disappointment but isn’t changing the broad market outlook (more on that in the Report).

Commodity prices continued to surge over the weekend, and that’s going to continue to increase inflation pressures.  Iron Ore prices rose 10% as China tightened supply amidst the global recovery.   Meanwhile, wholesale gasoline prices rose 2% following a cyber-attack that closed the Colonial Pipeline, although the outage isn’t expected to be long-lasting.

Today there are no notable economic reports and only one Fed speaker, Evans (8:30 a.m. ET, 2:00 p.m. ET).  So, unless we learn the Colonial Pipeline outage will be long-lasting (which would send gasoline prices sharply higher), I’d expect relatively quiet trading today.

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Stimulus Update and Jobs Report Preview

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What’s in Today’s Report:

  • Stimulus Update (A Deal by Next Friday?)
  • Jobs Report Preview:  What Markets Need a “Just Right” Number
  • OPEC+ Update and Oil Outlook

Futures are marginally higher ahead of the jobs report on more positive stimulus commentary overnight.

More Dems and Republicans voiced support for the $900-billion-ish stimulus bill overnight, and some, or all, of the bill could be passed by next Friday (the budget deadline).

Economic data was again solid overnight as German Manufacturers’ Orders beat estimates (2.9% vs. (E) 1.5%).

Today focus will be on any more stimulus headlines and the Employment Situation report.

Expectations for the jobs report are: Job Adds: 500K and U.E. Rate:  6.8%.  Anything above 250kish jobs adds should be “fine” for the market, especially given the stimulus momentum and it’d likely take a negative number to hit stocks.

Finally, there are several Fed speakers today including: Williams (8:05 a.m. ET), Evans (9:00 a.m. ET) and Bowman (10:00 a.m. ET), but none of them should materially move markets.

A Historic Week Finally Arrives

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What’s in Today’s Report:

  • A Historic Week Finally Arrives
  • Weekly Market Preview:  This is a week full of potential catalysts including:  The election, the FOMC decision, the jobs report, a potential vaccine announcement, and more QE from the BOE.
  • Weekly Economic Cheat Sheet:  Jobs Report (Friday) is the key this week.

Futures are more than 1% higher following a generally quiet weekend as markets bounce ahead of a week full of potential catalysts.

Politically, Biden maintains a wide lead nationally but polls have tightened in some key swing states (FL/AZ/IA). But, markets do still expect the “Blue Wave” final result.

Economic data was solid was Chinese, EU and UK manufacturing PMIs all beat estimates (and remained above 50).

Today we do get one important economic report, the October ISM Manufacturing PMI (E: 55.7), but that shouldn’t move markets unless is a big negative surprise.  Instead, we’ll start to get headlines and whispers about how the election is shaping up (early voting totals, etc.) and those headlines are likely to move markets today and tomorrow.  So, don’t be surprised if markets get volatile today and tomorrow, but keep in mind almost all of it will be trading “noise.”

Was the Jobs Report an “All Clear” for Markets?

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What’s in Today’s Report:

  • Was the Jobs Report An “All Clear” for Markets?
  • Is a “V” Shaped Recovery Happening?
  • Weekly Market Preview:  Fed Meeting Wednesday
  • Weekly Economic Cheat Sheet:  Jobless Claims Remain the Key Report

Futures are modestly higher thanks to momentum as markets extend Friday’s rally following a quiet weekend.

Economic data was mixed overnight as Chinese exports were better than expected (-3.3% vs. (E) -6.5%) while German Industrial Production missed estimates (-17.9% vs. (E ) -16.2%).  But, neither number was bad enough to turn the bullish momentum.

Protests continued across the U.S. and were mostly peaceful, but this remains largely a non-issue for markets.

Today there are no economic reports and no Fed speakers so re-opening headlines and virus trends will drive trading, and as long as there isn’t any materially negative news on either front, the bulls will likely remain in charge.

Technical Update (Important Support and Resistance)

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What’s in Today’s Report:

  • Technical Update (Important Support and Resistance)
  • Jobs Report Preview (It’s Going to be Ugly)

Futures are moderately lower as markets digest Thursday’s rally ahead of today’s jobs report.

Economically, global service PMIs were worse than expected and the drops were historic.  The EU service PMI plunged to 26.4 vs. (E) 28.4, down from 52.6 in Feb.

The Chinese service PMI rebounded strongly in March, rising to 43.0 from 26.5, confirming that their economy is seeing a strong bounce back in activity.  This is mildly encouraging because the Chinese data implies that once the coronavirus pandemic has passed (against sooner than later) we should see a strong bounce back in the economy.

Today focus will be on the jobs report, and the estimate are as follows: Jobs:  -150K, UE:  3.9%,  Wages:  0.2%.  But, the “worst case” estimate we saw was for -1.25 million jobs, so don’t be shocked if the number is much worse than the estimate.  Also, we get the March ISM Non-Manufacturing PMI (E: 43.0).  If that can beat that low estimate, that will be a small moral victory.

Was the Jobs Report an “All Clear” on the Economy?

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What’s in Today’s Report:

  • Was the Strong Jobs Report an “All Clear” on the Economy?
  • Weekly Market Preview:  What Happens on December 15th?
  • Weekly Economic Cheat Sheet:  A Busy Week or Reports (They Start on Wednesday)

Futures are slightly lower as markets digest Friday’s big rally following a generally quiet weekend.

On U.S./China trade, there was no new news, although China released a statement saying it wanted to make a deal “as soon as possible.”

Economic data was again mixed, as Chinese exports missed estimates (1.3% vs. (E) 1.9%) while German exports beat expectations (1.2% vs. (E) -0.3%.  But, neither number is moving markets.

Today there are no notable economic reports and no Fed speakers (they are in their blackout period ahead of Wednesday’s decision) so focus will again be on any updates on U.S./China trade.

The December 15th tariff increases are the last “big” event of 2019 and markets fully expect those to be delayed, so any confirmation of that should be a mild tailwind on stocks.  Conversely, any hints the tariffs might go into effect will hit markets, potentially hard.

Jobs Day

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What’s in Today’s Report:

  • Trade Update – What’s the Latest?
  • Key Levels to Watch in the Dollar and 10 Year Yield
  • OPEC Update – Positive or Negative for Oil?

Futures are modestly higher again as markets ignore more soft economic data and instead focus on incrementally positive U.S./China trade headlines.

China reduced import tariffs on U.S. soybeans and pork and that’s being interpreted as a mild positive in the negotiations, and that’s the reason futures are higher.

Economic data again disappointed as Japanese Household Spending and German IP (-1.7% vs. (E) 0.2%) both missed.

Today the key event on the calendar is the jobs report, (E: Jobs: 180K, UE Rate: 3.6%, Wages: 0.3%) and again the stronger the number, the better.  We also get Consumer Sentiment (E: 96.8) this morning, and given the focus on consumer spending, that number is more important than usual.  Like the jobs report, the stronger the number, the better for stocks.

Finally, regarding trade, Larry Kudlow will speak on CNBC at 9:30 so we’ll likely get another non-specific, yet positive, update on the U.S./China trade “mood music,” so don’t be surprised if you see a temporary pop in stocks right at the open.

Technical Update (Key Support and Resistance Levels)

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What’s in Today’s Report:

  • Technical Update (Key Support and Resistance Levels to Watch)
  • Jobs Report Preview (Still a Very Important Report)
  • EIA/Oil Market Update

Futures are modestly higher mostly on momentum from Wednesday’s rally, following a quiet night of news.

On trade, China’s Ministry of Commerce said the two sides remained in close communication, but we already knew that and there were no new/notable trade headlines overnight.

Economic data was notably bad.  EU Retail Sales, German Manufacturers’ Orders, Australian Exports and Australian Retail sales all badly missed expectations, and while you wouldn’t know it according to stocks, the outlook for the global economy remains uncertain.

Today there is just one economic report to watch, Jobless Claims (E: 220K) and one Fed speaker: Quarles (10:00 a.m. ET).  So, as has been the case all week, markets will trade-off any new U.S./China trade commentary or headlines.  But barring negative news, the path of least resistance for stocks today appears higher once again.

Tom Essaye Quoted in Yahoo Finance on October 3, 2019

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“Bottom line, worries about the economy spiked this week, and the last thing this market needs is a soft jobs number to reinforce the idea that any trade truce next week between the U.S. and Chins is ‘too late’ to help manufacturing sentiment. So, it’s not often the case, but the stronger this jobs report, the better, as a strong report will help calm any…” says Sevens Report Research founder Tom Essaye. Click here to read the full article.

New York Stock Exchange Traders

What the Strong Jobs Report Means for Markets

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What’s in Today’s Report:

  • What Friday’s Jobs Report Means for the Markets
  • Weekly Market Preview (Powell’s testimony is the big event this week)
  • Weekly Economic Cheat Sheet (Fed Minuets and CPI)

Futures are slightly lower this morning following a quiet weekend of news, as markets digest what Friday’s jobs report means for future Fed rate cuts.

Following the jobs report, investors still expect a rate cut this month, but what’s now in doubt is whether we see additional cuts after that, something the market is assuming and has already priced in.  Doubts over the number of future cuts is why stocks dipped Friday and are marginally lower this morning.

Economic data was again underwhelming as Japanese Machine Orders (-7.3% vs. (E) -3.0%) and German Industrial Production (-3.7% vs. (E) -3.2%) missed estimates, while German exports were slightly better (-1.1% vs. (E) -0.9%).

The important events this week come Wednesday via Fed Chair Powell’s testimony before Congress (will he telegraph a rate cut?), the FOMC Minutes (also out Wednesday – is there consensus for a cut?) and CPI (out Thursday).  So, today should be generally quiet as there are no economic reports or notable Fed speakers, although U.S.-China trade negotiations will re-start, so we’ll have to watch for any headlines from there.