Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Tuesday, Dec. 5. The Bottom Line segment of today’s podcast starts at (4:04) for listeners who want to skip ahead.
State of Play
Stocks finished lower yesterday but well off of the lows of the session. Small caps were the outlier however, continuing their advance. As we look at our board of indicators at 0635, it looks like we could be due for some selling:
Stock index futures are pointing to a lower open, with tech seeing the worst of it so far. The Nasdaq is down 0.6% with S&P 500 off 0.4%. Small caps are also going along with this, with the Russell 2000 down 0.3%;
Bonds are seeing a few bids, with the 2-year yield down 3 basis points to 4.63% whilst the 10-year yield is down 4bps to 4.24% (yields move inversely to prices);
Commodities are mixed. WTI crude oil is flat at $73/barrel but copper is down >1%;
Cryptos are mostly unchanged. Bitcoin is flat, trading at $41,600.
Known Events
Some earnings to start us off. Nio (NIO 0.00%↑) just reported mixed results but the outlook appears to have been positive and that stock is moving higher in the pre-market.
Autozone (AZO 0.00%↑), Signet Jewelers (SIG 0.00%↑), JM Smucker (SJM 0.00%↑), and Designer Brands International (DBI 0.00%↑) also report before the open at 0930. After the close at 1600 we’ll hear from MongoDB (MDB 0.00%↑), SentinelOne (S 0.00%↑), Toll Brothers (TOL 0.00%↑) and others.
The Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. Economists expect 9.35 million job openings, down a bit from the 9.55 million seen last month, but what’s arguably more important are some of the details that are included in the report. The quits levels is The Contrarian’s personal favorite as these disclose the percentage of people willingly leaving the workforce each month. Unfortunately this is all a little dated (it’s October data).
At the same time as JOLTS we’ll also get a first look at ISM Non-Manufacturing PMI. The number economists are looking for is 52.0, which is up a bit from the 51.8 seen last month. The 50 level separates expansion from contraction. No secret that the non-manufacturing (ie services) sector is quite healthy indeed.
The Bottom Line©️
It’s hard to see how any of today’s known events will move markets much. Earnings are all second-tier and the JOLTS is dated. Services PMIs rarely do the trick.
That leaves us pondering the psychology of this set up and whether fear or greed is driving things. It seems like greed is still in control. Past performance is not a guide to future results but it would make sense to see stocks eventually join the crypto rally. The fact that tech stocks seem especially divorced from this is strange, though not unprecedented (happened this spring around the time of the bank failures).
Could this have all been a crypto-specific rally that doesn’t become a stocks rally? Sure. Again, it wouldn’t be consistent with what we’ve seen before, but patterns are made to be broken. Of course it’s also possible that this crypto rally was a one-time thing that is now over already.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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JOLTS, Services PMIs, Earnings