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T3’s Take 3: Bears Fail Ahead of Pivotal Jobs Report
1) Jobs in Focus The nonfarm payrolls report is always one of the biggest events of the month, and with traders thinking the Fed is about to raise rates, tomorrow’s August report is no exception. Today, the US dollar fell on profit-taking following weaker-than-expected Markit US Manufacturing PMI, ISM Manufacturing, and Construction Spending numbers. But it’s been had a nice bounce since the Fed hawks came out in force to prepare the market for additional rate hikes. So presumably, traders are gearing up for a repeat of the big July jobs report, which was an impressive across-the-board beat. 2) The Bears Fail in Spectacular Fashion. The S&P 500 fell 0.6% to 2157.09 in early trading and the VIX popped 8.9% to 14.61. That had a lot of folks — myself included — thinking the S&P would have its first 1% down day since June 27. However, that small dip was quickly bought and the index climbed up to finish flat on the day. Biotechnology overcame an early deficit to turn green, and we also saw rebounds in large cap tech and transports. Regional banks led the decliners column, and energy was weak due to another drop in oil prices. 3) Jeff Cooper on Twitter Twitter (TWTR) has been one of the hottest stocks in the market, and today, Jeff Cooper stepped in to break down the action: TWTR continues be on the prowl into the weekend on great expectations of something going on. This morning it Pinocchioed the 20 strike which perpetuated some selling and a pullback to yesterday’s highs coincident with the 20 period on the 10 min as anticipated in yesterday’s note. Note how this morning’s spike occurred out of an hourly bull flag following yesterday’s surge. Friday’s Trading Calendar US Economics (Time Zone: EDT) 08:30 Trade Balance (Jul): exp. -$41.4b, prior -$44.5b 08:30 Change in Nonfarm Payrolls (Aug): exp. 180k, prior 255k 08:30 Two-Month Payroll Net Revision (Aug): prior 18k 08:30 Change in Private Payrolls (Aug): exp. 180k ,prior 217k 08:30 Change in Manufact. Payrolls (Aug): exp. -3k, prior 9k 08:30 Unemployment Rate (Aug): exp. 4.80%, prior 4.90% 08:30 Average Hourly Earnings MoM (Aug): exp. 0.20%, prior 0.30% 08:30 Average Hourly Earnings YoY (Aug): exp. 2.50%, prior 2.60% 08:30 Average Weekly Hours All Employees (Aug): exp. 34.5, prior 34.5 08:30 Change in Household Employment (Aug): prior 420 08:30 Labor Force Participation Rate (Aug): prior 62.80% 08:30 Underemployment Rate (Aug): prior 9.70% 09:45 ISM New York (Aug): prior 60.7 10:00 Factory Orders (Jul): exp. 2.00%, prior -1.50% 10:00 Factory Orders Ex Trans (Jul): prior 0.40% 10:00 Durable Goods Orders (Jul F): exp. 4.40%, prior 4.40% 10:00 Durables Ex Transportation (Jul F): exp. 1.50%, prior 1.50% 10:00 Cap Goods Orders Nondef Ex Air (Jul F): prior 1.60% 10:00 Cap Goods Ship Nondef Ex Air (Jul F): prior -0.40% 13:00 Fed’s Lacker Speaks on Interest Rate Benchmarks in Richmond 13:00 Baker Hughes U.S. Rig Count (9/2): prior 489 13:00 Baker Hughes U.S. Rotary Gas Rigs (9/2): prior 81 13:00 Baker Hughes U.S. Rotary Oil Rigs (9/2): prior 406 Global Economics 03:00 EUR Spanish Unemployment Change 04:30 GBP Construction PMI 08:30 CAD Trade Balance Earnings Before Open: None of Significance After Close: None of Significance
Continue Reading -->For the Love of Everything That Is Holy, Can We Please Get a Real Move?
With market volatility at 20-month lows, I’m falling asleep. It’s like April-May all over again, but worse. Thankfully, we’ve got a pivotal NFP report coming today at 8:30 a.m. ET. So maybe, just maybe we’ll get some real movement today. Economists are looking for 180K on the headline number, 0.2% MoM growth in hourly earnings, and a 4.8% unemployment rate. Last month, we saw a huge 107K beat on the headline number, which just about made up for the 122k miss the month before. On the surface, it seemed like a very much hawk-supporting report, but the market’s reaction said otherwise. Gold and bonds dipped on the report, then ripped like mad. Equities followed through on the decline in rates with a big 1.5% rally in SPX. Traders assumed that the report wouldn’t necessarily make the Fed get more hawkish, and it turns out those traders were right. Based on some weak economic data (GDP, PCE Deflator) and the Bank of England’s huge forecast cut for UK growth (which implies a nasty Brexit impact), the Fed’s forward path looks pretty dovish, at least-near term. But remember, Fed expectations tend to turn on a dime. Fed funds futures are now pricing in a 37% chance of a December rate hike — but that mumbers was down to 9% post-Brexit. I’m not in the silly business of making NFP guesses. But the scenario I would like to see is a modest beat on the headline numbers — say 190k-220k — which I think could drive a rip above 2200 within a day or two on the basis that “the number’s not hot enough to move the Fed but it’s good enough to show things aren’t falling apart.” SPX futures are up fractionally this morning following modest gains in Europe. The dollar is down a tad against the euro and yen, while gold is up a hair. Gold miners are indicated up after strong performances in euro-areaminers. Cybersecurity name FireEye (FEYE) is getting hit hard on its awful quarter. It may end up in the M&A rumor column soon, so maybe put it on your radar screen. LinkedIn (LNKD) beat by a mile, which means Microsoft (MSFT) timed the deal pretty well. Well done fellas. The sideways grind means we’re working off overbought conditions, and some sentiment indicators have cooled off. The AAII survey shows that individual investors are fairly bearish, and the ISE Sentiment Index’ 10-day moving average is coming down a bit. I will admit that some others like the shape of the VIX curve (though the VIX could drop even more) and Investors Intelligence Survey indicate serious complacency. So sentiment is still bullish, but slowly moving towards being mixed. I’d rather see more outright bears, but let’s deal with what we’re given instead of what we want. Good luck friends!
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