PMIs, JOLTS, Sell-Off in Staples Stocks

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets. It is Tuesday, Jan. 7. Today’s Stocks on the Contrarian Radar©️ segment, focused on consumer staples stocks (ETF XLP 0.00%↑), can be read at the bottom of this page.

State of Play

Stocks advanced yesterday led by tech, with all things AI being bid up by investors ahead of the Consumer Electronics Show in Las Vegas. There Nvidia (NVDA 0.00%↑) CEO Jensen Huang didn’t disappoint, unveiling a slew of new initiatives in robotics, gaming, and elsewhere. The stock continued to advance overnight, to fresh record highs.

As we eye our board of indicators for signs of direction at 0645, this has yet to translate to a broader move to risk-on. Things are pretty quiet:

• Stock index futures are effectively unchanged, with no major US index moving more than 0.2% from the break-even point;

• Cryptos are continuing to advance however. Bitcoin is up 1.5% to trade around $100,500;

• Commodities are moving a tiny bit higher, with WTI crude oil up 0.5% to trade around $74/barrel and copper up 0.4%;

• Bonds continue to move lower. The 10-year yield is up 2 basis points to 4.64%, its highest level in some nine months (yields move inversely to prices).

Today’s Known Events

A couple of economic data releases to tell you about:

• ISM Non-Manufacturing PMIs are out at 1000. Economists who were surveyed expect a reading of 53.2, which would be an improvement over the 52.1 recorded last month and still ahead of the 50 line that separates expansion from contraction;

• The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, or JOLTS, is also out at 1000. The expectation here is for 7.77 million job openings, a small increase from the 7.74 million recorded last month. The quits levels were about 3.3 million last month, corresponding to 2.1% of the workforce. That’s a slight increase from the previous month when the quits level was 1.9%. There unfortunately isn’t an economist estimate for that.

After the close at 1600 we’ll get a few earnings reports:

• AAR Corp (AIR 0.00%↑), which supplies the aerospace and defense industries (thanks to Threads user Teezlord for the tip on this);

• AZZ (AZZ 0.00%↑), which provides metal coating services.

The Bottom Line

Economists appear to have set pretty high expectations for the PMI. Could that be set up for disappointment? It’s more likely to move markets than JOLTS, which provides dated information (we’re getting November data today).

Yesterday’s rally in tech stocks and cryptos tells us investors are still quite interested in the riskiest part of the market. So risk appetite is healthy. Failing any information to change the narrative, that could provide somewhat of a floor.

When might we get information to change the narrative? If today’s PMIs don’t do it, then FOMC meeting minutes tomorrow could. Otherwise earnings and non-farm payrolls on Friday will be the next hurdle.

Stocks on the Contrarian Radar©️

Staples stocks got beaten up yesterday for some reason. The Consumer Staples Select Sector SPDR® Fund ETF (XLP 0.00%↑) dropped 1%. It’s not entirely clear what caused this. It’s curious because growth stocks rallied. These don’t always move together, but they also don’t diverge this dramatically.

‘Trader peruses staples stocks’ by author via Grok AI