Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Sept. 1. Welcome to September.
State of Play
Lululemon (LULU 0.00%↑) reported strong earnings after yesterday’s close and encouragingly cited strong sales in China in raising full-year guidance. Some other positive news in China as authorities announced a series of measures to help that country’s economy. China’ Ministry of Commerce even made some friendly overtures toward the US. As of 0630 we are looking at some risk-on developing as a result:
Stock index futures are pointing to gains, led by large-caps. The S&P 500 is up 0.4%. Nasdaq futures are up 0.2%;
Commodities are gaining ground. Copper is up 1.3%. WTI crude oil is up 1% to trade around $84.50, its highest level in a month;
Cryptos are not taking part in the rally, with Bitcoin down 4% to trade around $26,000;
Bonds are unchanged. The 2-year yields 4.86%. The 10-year 4.11%.
Known Events
It’s the first Friday of the month making this Jobs Day. Non-farm payrolls are out at 0830. Economists expect 170,000 new jobs, down a bit from the 187,000 recorded last month, which would keep the unemployment rate at 3.5%. As you can see, job growth appears to be trending downward in recent months:
We’ll get a fresh reading of purchasing manager indexes in the US at 1000, but seeing how this is the second reading it will likely just confirm what’s in the first and therefore unlikely to move markets.
The Bottom Line©️
Yesterday’s PCE Deflator came in exactly as anticipated and there was no real market reaction as a result. It’s the same playbook today: bad news is good news. A lower-than-anticipated jobs number will mean less pressure on the Fed to raise rates. Only 12% of futures traders are expecting the Fed to raise at their next meeting on Sept. 20. If we get a big jobs number you can expect that to change.
Maybe. It is the last unofficial trading day of summer when things are typically quiet. Volumes have been light all week and dwindling as the week has worn on. Chances are there won’t be much of a reaction at all.
Housekeeping
Monday is Labor Day in the US and markets are closed. As a result there will be no briefing or podcast that day.
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Non-Farm Payrolls