Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Nov. 3. Jobs Day. The Bottom Line segment of today’s podcast starts at (3:20) for listeners who want to skip ahead.
State of Play
Stocks put in a major rally yesterday, presumably on the back of the Fed. Small caps had the biggest gains (Russell +2.5%), consistent with a broad risk-on rally. There were some disappointing earnings from Apple (AAPL 0.00%↑) overnight however. The company crucially said it doesn’t expect growth for this quarter, traditionally its busiest of the year.
Overall as of the time of this writing (0630) things are pretty quiet ahead of non-farm payrolls at 0830:
Stock index futures are flat with the exception of the Nasdaq (-0.4%) presumably due to Apple earnings;
Bonds are unchanged. The 2-year yields 4.99%. The 10-year yield is 4.66%.
Commodities aren’t doing much either. WTI crude oil is unchanged at $82.50/barrel. Copper is down 0.4%;
Cryptos are dropping. Bitcoin is doing 3% to trade around $34,200. Remember that cryptos, specifically Bitcoin, have been a leading indicator for stocks recently.
Known Events
Today is all about non-farm payrolls. The Bureau of Labor Statistics releases the data at 0830. Economists expect 188,000 payrolls, down from the 336,000 seen last month, to keep the unemployment rate at 3.8%.
We do have some earnings as well, all before the open at 0930: Consumer goods conglomerate Church & Dwight (CHD 0.00%↑) and Burger King parent Restaurant Brands International (QSR 0.00%↑) are among highlights.
The Bottom Line©️
We’ve now had four straight days of gains, with S&P and Nasdaq each up ~5% on the week. The S&P’s brief foray into corrections territory is already a distant memory, but that was just Monday.
Can this good cheer over risk assets (not just stocks but also bonds) persist? There seems to be some real momentum behind the buying now that make this feel a little more permanent.
Ain’t no such thing. There will be renewed selling at some point. The only question is when, why, and how bad. Maybe today’s non-farms will manage to spook investors? Either way, this is probably not the time to take out more risk exposure. Certainly not if you bought on the way down like The Contrarian did.
What’s real and what’s for sale? On Monday, you were told that the economic expansion likely still had room to run. The market appears to be getting wise to this, helped by the Fed’s assessment on Wednesday. Still doesn’t mean it’s right. And even if it is, it doesn’t mean inflation is permanently cured. The Fed could still have to raise rates. Any number of other things could happen to upset the whole applecart.
The Contrarian will sit back and enjoy this rally while it lasts, with an eye on trimming some gains as the opportunity arises. But just like Monday’s doom and gloom was likely overdone, so this newfound euphoria could be equally elusive.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Non-Farm Payrolls, Happy Days for Stocks