Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Friday, July 7: Jobs Day. This is the updated briefing to include the non-farm payrolls number. The audio will not reflect the NFP print.
State of Play
Non-farm payrolls came in short of economist estimates (209,000 versus 225,000 anticipated). As of 0845, markets have reversed direction thanks to the NFP number:
This is most pronounced in bond markets. Yields have stopped their ascent. The 2-year is down 5 basis points to 4.95% with the 10-year down 3bps to 4.01% (yields move inversely to prices);
Stock index futures were moving higher but have no reversed, with small caps leading things downward (Russell 2000 down 0.4%). Other indexes are down a little less right now;
Commodities are showing a few signs of life with copper up ~1%. WTI crude oil is up 0.5% to trade north of $72/barrel;
Cryptos are still down. Bitcoin is off 3.5% to drop close to the $30,000 threshold. Bitcoin has been a bit of a leading indicator for stocks since the bank failures in March, so maybe keep an eye on that.
Known Events
Non-farm payrolls came in short of forecasts as noted. This dropped the unemployment rate to 3.6% from 3.7%. Private payrolls also came up short, with 149,000 versus 200,000 expected. You have to go back to the darkest days of Covid (February 2021) to see anything lower. Average hourly earnings were still up more than anticipated however: 0.4% versus 0.3% month-over month, which translates to 4.4% year-over-year (4.2% anticipated).
As you can see below, the payrolls figure was starting to inch up again before this print, with consecutive increases the last three months:
The Bottom Line©️
Markets were on edge a bit after yesterday’s hot ADP Payrolls report. To recap, 228,000 new jobs were expected but 497,000 came in. That was enough to prompt some selling, but it looks like that was an outlier.
So all of this week’s selling could be a giant over-reaction and a small hiccup in a bull market that has been raging for months (but officially started about a month ago). Is it enough to get the Fed to back off additional rate hikes? Surely more information will be necessary, but for now we’ll take it.
Housekeeping
Obviously this is not investment advice (duh). Do your own research, make your own decisions.
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Non-Farm Payrolls Fall Short of Estimates (Update)