Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Sept. 3. The Bottom Line segment of today’s podcast starts at (4:19) for listeners who want to skip ahead.
State of Play
It was a quiet, long holiday weekend in the US. Now September trading is about to get underway and with it the last month of the third quarter. As we eye our board of indicators for signs of direction at 0645, some risk-off is clearly developing in all but one area on our board:
Stock index futures are dropping led by small caps. The Russell 2000 is down >1%. Nasdaq futures are down 0.6% followed closely by the S&P 500;
Commodities are moving lower, with the major move in copper, down >3%. WTI crude oil is down almost 2% to trade around $72/barrel;
Cryptos are holding up, however. Bitcoin is up 1% to trade north of $59,000;
Bonds aren’t doing anything but the yield curve is about to un-invert. For real this time. The 2-year yield 3.93% whilst the 10-year yields 3.91%.
Today’s Known Events
ISM Manufacturing PMIs are out at 1000. There is only one of these each month. This is August’s. The expectation is for a reading of 47.5, an improvement over the 46.8 recorded last month but still below the 50 level separating expansion from contraction.
There is actually quite a bit in this report, including manufacturing prices (a good gauge of producer price inflation), employment, new orders, and more. The only one that has an economist estimate is prices and that is expected to print at 52.5 after 52.9 last month.
At the same time we’ll get figures on Construction Spending for July. The expectation is for an increase of 0.1% month-over-month, an improvement over the 0.3% decline recorded last month.
There are a few earnings of interest, but not until after the close. Zscaler (ZS 0.00%↑), Gitlab (GTLB 0.00%↑), and Sportsman’s Warehouse (SPWH 0.00%↑) are the highlights there.
The Bottom Line
Not sure what all the selling is about this morning but cryptos holding up tells us it may not last. The premise here is that with no functional value to speak of (other than gambling and criminality) cryptos are a pretty perfect gauge of investor risk appetite. If cryptos are holding up, then so too must investor risk appetite. Unless cryptos are just slow to the party.
The Manufacturing PMIs could actually be pretty big seeing how this potentially a leading indicator for hiring. Indeed there is a hiring number that is extracted here. Just keep in mind that this whole thing is a survey and as such may not be binding. In fact, it may be completely irrelevant. But it is an indicator and often a reliable one so investors will be paying attention.
The rest of the week will be building to non-farm payrolls on Friday. Keep in mind that last month that was the catalyst for a nasty bit of selling. We’ve since rebounded but one can surmise that markets will be on edge a little bit leading up to Friday…
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
The new monthly Contrarian Portfolio letter provides full transparency around The Contrarian’s positions. That’s July’s letter. August’s will be done shortly.
This Substack chat tracks The Contrarian’s trades in (almost) real time.
If this daily thing is drowning your inbox and/or you CBF to bother with it and prefer to just get the guest feature or actionable highlights — you can control these settings on your account page.
Finally, if you enjoy this and want others to experience it, please gift a subscription to your friends (or even your enemies).
Manufacturing PMIs, Construction Spending