Daily Markets: Number of Jobs to Boost Trade Ahead of Holiday Weekend


The big picture today

Asia-Pacific equity indices ended today’s session on a mixed note. Several markets closed almost flat with the Japanese Nikkei down 0.04%, China’s Shanghai Composite up 0.05% and India’s Sensex up 0.06% while South Korea’s KOSPI fell down 0.26%, Australia’s ASX All Ordinaries fell 0.33% and Hong Kong’s Hang Seng closed 0.74%. Taiwan’s TAIEX led the way, down 0.87% on weakness in transportation and energy minerals. By midday, European equity indices are up in all areas except Norway and Portugal, and US futures are pointing to a soft open later this morning.

With stock futures pointing to a soft open, it’s more than likely that the August jobs report released at 8:30 a.m. ET will reinforce the direction stocks are trading today ahead of the long weekend. This report is expected to show that the US economy added 300,000 jobs during the month compared to 528,000 the previous month, keeping the unemployment rate stable at 3.5%. Other data to watch in the report will be average hourly earnings, which are expected to rise 5.3% from year-ago levels, slightly faster than the 5.2% shown in the July report.

If the number of jobs created does not match the consensus forecast and wage growth increases as expected or more, the market will likely see this reinforce the slow rise in growth rates for the longer narrative. If the number of jobs created during the month were higher than expected and wage gains were lower than in July, the market would probably applaud this result since this is another data point indicating progress in inflation. The most confusing scenario for market watchers will be if the number of jobs created during the month is lower than expected and wage gains are lower than in July.

Setting the stage for this report, recent economic data led the Atlanta Fed’s latest GDP for the current quarter to rise from 1.6% to 2.6% and the CME FedWatch tool shows a 74 probability % that the Fed will raise rates by 75 basis points at the end of the September meeting. From our perspective, unless the data on wage pressure contained in the August jobs report drops significantly, the Fed should not reverse its recent comments. If the number of jobs added during the month turns out as expected or better, the Fed will likely consider the economy able to withstand its upcoming efforts to bring inflation back to its 2% target. Now, to see what 8:30 a.m. ET brings…

With US stock markets closed on Monday, September 5 to observe Labor Day, the next edition of Daily Markets will take place on Tuesday, September 6.

Data download

International economy

Eurozone annual producer inflation hit a new record high of 37.9% in July, up from 36% in June and the consensus forecast of 35.8%. A major contributor to the figure is the 97.2% year-on-year jump in energy prices during the month. On a month-to-month basis, July producer prices jumped 4%, well above the expected 2.5% increase and marked the biggest rise in four months.

G-7 finance ministers are meeting today and are expected to agree to back a plan that would introduce a price cap for global purchases of Russian oil.

Although supply remains tight, concerns over China’s latest lockdown, implications for the European Central Bank’s upcoming rate hike and a slowing global economy are weighing on oil prices this morning. Reuters Reports of rising Covid-19 cases are raising fears that citizens of China’s tech hub Shenzhen will face their second citywide lockdown this year.

Domestical economy

As we shared above, at 8:30 a.m. ET the August jobs report will be released. Shortly after the shares trade, the July Factory Orders report will be released and an increase of 0.2% is expected, compared to +2.0% the previous month.

Yesterday, Atlanta Federal Reserve Chairman Raphael Bostic said the US central bank’s campaign to calm inflation was still not over. By BloombergBostic said, “We need to figure out how quickly we’re going to move our policy to try to stop that inflation and get it down to 2%.”

Markets

The bigger, more stable names appeared to prevail yesterday as the Dow Jones and S&P 500 indices closed ahead 0.46% and 030%, respectively, after a tough start to the day. The Nasdaq Composite also fell in the morning but failed to break the previous day’s close, down 0.26% while the Russell 2000 finished down 1.15%. Energy and Materials stocks came under pressure while Healthcare and Utilities rose, with classic defensive positioning setting the tone.

Here’s how the major market indicators stack up since the start of the year:

  • Dow Jones Industrial Average: -12.88%
  • S&P 500: -16.77%
  • Nasdaq compound: -24.67%
  • Russell 2000: -18.82%
  • Bitcoin (USD-BTC): -56.65%
  • Ether (ETH-USD): -57.00%

Stocks to Watch

Citing strong demand in the cloud, service providers and enterprises, Broadcom (AVGO) released results for the July quarter that beat consensus expectations for revenue and EPS. With expectations for this end-market demand to continue, Broadcom issued an upward guidance for the current quarter with revenue of $8.9 billion versus consensus of $8.72 billion. .

Lululemon Athletica (LULU) crushed consensus expectations for its July quarter, led by 23% of total mockup sales for the quarter. Net direct-to-consumer revenue accounted for 42% of total revenue, up slightly year-over-year. For its October quarter, the company forecasts EPS of $1.90-1.95 versus consensus of $1.78 with revenue in the range of $1.780-1.805 billion versus consensus of $1.780 billion. $.73 billion and the $1.87 recorded in the July quarter. The company ended the quarter with an 85% increase in inventory year-over-year, which the company sees as supporting its expected revenue growth.

Starbucks (SBUX) announced that Laxman Narasimhan will become its next CEO and board member effective October 1. Previously, Narasimhan held various management positions at PepsiCo (PEP)including as Global Chief Commercial Officer, where he was responsible for the company’s long-term strategy and digital capabilities.

The Federal Communications Commission announced the winners of an auction of the 2.5 GHz spectrum band, and T-Mobile (TMUS) won most licenses.

Meta platforms (META) and Qualcomm (QCOM) has struck a deal to develop custom virtual reality chips based on its Snapdragon platform for Meta’s Quest VR devices.

Before Apple (AAPL) special event on September 7, data from Counterpoint Research indicates that Apple exceeded Google (GOOGL) Android will represent more than half of all smartphones used in the United States, up from 45% in 2021.

IPOs

As of now, no IPO is expected to be priced this week. Readers who want to dig deeper into the schedule of upcoming IPOs should visit Nasdaq’s Latest and Upcoming IPOs page.

After today’s market close

No company is expected to release quarterly results after shares halt trading today. Why? Because it’s Friday before a long weekend. Those interested in learning more about which companies release their reports when head to the Nasdaq earnings calendar.

on the horizon

monday september 5

  • Japan: Nikkei Services PMI – August
  • Euro zone: S&P Global Services and Composite PMI (Final) – August
  • United Kingdom: Services and composite PMI (final) – August
  • Euro zone: Retail sales – July

tuesday september 6

  • Japan: Household spending – July
  • Germany: factory orders – July
  • United States: S&P Global Services and Composite PMI – August
  • ISM non-manufacturing index – August

Wednesday, September 7

  • China: Import/Export Data – August
  • Euro zone: change in employment, GDP – 2nd quarter 2022
  • US: Weekly MBA Mortgage Applications
  • United States: Fed Beige Book

Thursday, September 8

  • Japan: GDP – 2Q 2022
  • Japan: Economy Watchers Current Index – August
  • Euro zone: decision of the European Central Bank on rates and press conference
  • United States: Initial and Continuing Weekly Unemployment Claims
  • United States: EIA Weekly Natural Gas Inventories
  • United States: EIA Weekly Crude Oil Inventories
  • United States: Consumer credit – July

friday september 9

  • China: consumer price index, producer price index – August
  • Japan: Machine tool orders – August
  • United States: Wholesale inventories – July

Thought of the day

“Be true to your teeth and they won’t deceive you.” ~ Soupy Sales

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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