Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Feb. 2, 2024. The Bottom Line segment of today’s podcast starts at (3:20) for listeners who want to skip ahead.
State of Play
Stocks rallied yesterday and continued after the close as a result of earnings from Meta (META 0.00%↑ and Amazon (AMZN 0.00%↑). As we look at our board of indicators at 0635, this is carrying through to improved risk appetite:
Stock index futures are pointing to gains, led by tech. The Nasdaq is up 1% with S&P 500 futures up 0.6%;
Commodities aren’t doing much. WTI crude oil is up 0.5% with natural gas up 1%. Copper is down 0.2%;
Bonds are seeing a bit of selling after a big rally yesterday. The 2-year yield is up 4 basis points to 4.23% whilst the 10-year is up 2bps to 3.88% (yields move inversely to prices).
Today’s Known Events
Non-farm payrolls are the main event of the day. The number anticipated by economists is 187,000, down a bit from the 216,000 seen last month, which would nudge the unemployment rate up to 3.8% from 3.7%.
We’ve already had some earnings, from oil majors Exxon Mobil (XOM 0.00%↑) and Chevron (CVX 0.00%↑), both of whom reported mixed results but Chevron did raise its dividend. Church & Dwight (CHD 0.00%↑) is due intermittently. The others appear to be less economically-sensitive names like Cigna (CI 0.00%↑), Abbvie (ABBV 0.00%↑), and Bristol-Myers Squibb (BMY 0.00%↑).
The Bottom Line©️
Non-farm payrolls are the main event of the day but the market seems to want to rally regardless. Yeah there’s the usual math around NFPs — better than expected and it will crimp hopes of rate cuts, worse than expected and it could lead to the opposite — but there’s a sense this is a bit of an afterthought this month. The Fed’s supposed newfound hawkishness is certainly not impressing the bond market.
Meta earnings certainly helped shift the narrative. This stock will now pay a dividend and it is up 17% in the pre-market. This from a company that was left for dead as recently as 15 months ago (it was as low as the $90 range in November 2022. Now over $400. Not bad returns there). But again we have to ask the question if this rally will become more broad-based? And what about the regional banks? KRE 0.00%↑ is dropping again this morning…
So a couple of competing narratives. Of course, there are almost always competing narratives. It seems the Meta story is in charge right now. But for how long? If this week has showed us anything, it’s that these things can be quite shifty.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Non-Farm Payrolls