Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, Aug. 4. Jobs Day. Today’s briefing and podcast are free for all subscribers. To receive it every morning become a premium subscriber. You can get free merch if you sign up for a year now.
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State of Play
There were some mixed earnings results after yesterday’s close. Positive results from Amazon (AMZN 0.00%↑), DraftKings (DKNG 0.00%↑), and Dropbox (DBX 0.00%↑) are moving those stocks higher. Apple (AAPL 0.00%↑) and Airbnb (ABNB 0.00%↑) disappointed investors and are selling off. Add it all up and as of 0610 we look set to open a little higher:
Stock index futures are pointing to gains, led by tech. Nasdaq (QQQ 0.00%↑) is up 0.5%. S&P 500 (SPY 0.00%↑) futures are up about 0.3%;;
Commodities are mixed. WTI crude oil is gaining a bit, up 0.7% to trade around $82/barrel, close to a multi-month high. But copper is down 1%. Soft commodities corn, wheat, and soybean, are all up 1% or more;
Bonds are effectively unchanged. The 10-year yields 4.20%.
Known Events
It’s the first Friday of the month, which means it’s jobs day. Non-farm payrolls are out at 0830. Economists expect an even 200,000 new jobs, effectively in line with the 209,000 recorded at last month’s reading, to keep the unemployment rate unchanged at 3.6%. As you can see it’s been several years since we had a NFP number that low:
To be precise, you have to go back to December 2020, which was also the last time there was a negative jobs number (-268,000).
There are a few earnings worth mentioning as well. FuboTV (FUBO 0.00%↑) and Nikola (NKLA 0.00%↑) are the most interesting names there.
The Bottom Line©️
Stocks are on track to finish the week lower. First time that’s happened in awhile. The Nasdaq would have to gain 2.5% today to finish in the black whilst the S&P would have to make up nearly 2%. Not outside the realm of possibility, but usually not the type of thing you expect to see on a summer Friday.
When it comes to the NFPs, the typical calculation is that you don’t want a big rebound in the jobs number because that is likely to bring the fear of Fed rate hikes back to the forefront. That may no longer hold true. The theory that you don’t need labor markets to cool off for inflation to come down appears to be gaining prominence. A New York Times piece gets into this as well. The last couple of months would certainly bear that out as we’ve seen a big drop in inflation without much (or really anything) in the way of job losses.
Okay, so what if the jobs number is too soft? Will that kill the ‘soft landing’ narrative? Maybe only if it’s a major miss to the downside. Something like a negative number. But even then it’s hard to see how much fear can germinate from just one report.
This is a longwinded way of saying that today’s NFPs kinda don’t really matter. Investors don’t seem scared of much anymore. Even the debt rating downgrade has already been forgotten (as predicted in this space yesterday). This lends further credence to our last guest’s thesis that investors are fast approaching the ‘invulnerable extreme’:
It will likely take more than one jobs report to knock investors from this level. Maybe even a lot more. We’ll keep looking for clues next week. See you back here then. Have a great weekend.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Non-Farm Payrolls: Not Much to Fear