Earnings, ADP Employment, Pending Home Sales

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Wednesday, Aug. 30. The penultimate trading day of the month.

State of Play

Yesterday saw a strong rally on Wall Street after JOLTS came in well below forecasts, potentially removing some pressure on the Fed to raise interest rates. As of 0625 it’s a bit of a mixed bag where risk appetite is concerned:

• Stock index futures are down a bit, led by small caps. The Russell is pointing to a loss of 0.4% at the open. The Nasdaq (QQQ 0.00%↑) is down 0.2%, whilst S&P 500 (SPY 0.00%↑) futures are down just 0.1% ;

• Cryptos are rebounding in a major way on news that a spot ETF could see regulatory approval in the US after all. Bitcoin is up 5% to trade around $27,400;

• Commodities are a bit mixed. Copper is down 0.5% but WTI crude oil is up 0.7%, likely due to the hurricane that’s about to hit the Gulf Coast;

• Bonds are unchanged. The 2-year yields 4.91%. The 10-year 4.15%.

Known Events

There are a few earnings to tell you about: Brown-Forman, which makes Jack Daniels whiskey, is out before the open. So are Vera Bradley (VRA 0.00%↑), animal health concern Patterson (PDCO 0.00%↑), and Hovnanian Enterprises (HOV 0.00%↑). After the close we’ll hear from Crowdstrike (CRWD 0.00%↑), Salesforce (CRM 0.00%↑), Five Below (FIVE 0.00%↑), Chewy (CHWY 0.00%↑), and Okta (OKTA 0.00%↑), among others.

ADP employment figures are out at 0815. Economists expect 195,000 new jobs, well below the 324,000 seen last month. For sake of comparison the ADP figures are still a ways off of what non-farm payrolls report, which was 187,000 new jobs last month. JOLTS yesterday came in well below forecasts, so maybe there is something to job growth slowing?

Pending home sales are out at 1000. We saw yesterday that home prices as measured by Case-Shiller dropped a little less than expected in June. For pending home sales, economists are expecting a decline of 0.1% month-over-month, a drop from the 0.3% MoM increase recorded last month.

We’ll also get another reading of second-quarter GDP, but this can be safely ignored seeing how this is the second reading of Q2 GDP already and anyway GDP is an entirely trailing indicator.

The Bottom Line©️

That’s three days in a row of gains for stocks. Looks like the bull market could still have legs after all. As The Contrarian told you on Monday, the environment for risk allocation has been a lot worse. The S&P 500 is 2% short of reaching the break-even point for August. The Nasdaq is a little further off, still down 2.8% on the month. With two trading days left in the month, including today, could August actually turn into a winning month for stocks? What a reversal that would be after all the doom and gloom of one short week ago.

Of course, not all is rosy. We have sudden concerns about AI, that it might not be the boost to venture investing that had been hoped. Listeners to this podcast will of course have been alerted to these developments weeks ago. Over in the UK, the Bank of England is facing massive losses on its bond portfolio after its move about 11 months ago to shore up that country’s pensions. Here in the US, we have that hurricane and regional US banks facing renewed regulatory pressure.

Our guest this week has the contrarian view that the US economy will actually see a hard landing. The actionable highlights clip of the podcast recorded yesterday is available as an exclusive to you here (the full podcast will be available later today):

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