Why U.S. Stocks Rallied Despite The Blowout Payrolls Report For September

Seeking Alpha2023-10-08

Stocks reversed an early selloff following the September payrolls report.Ongoing U.S. job gains do not undermine an outlook for easing inflation going forward or force the Fed to hike rates again.The ...

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MagNet
2023-10-08
MagNet
Just the usual market manipulation by market makers. That s how they make easy money ! They are blood suckers, and the wallstreet mafia. They had already decided of the next market move before the NFP result. Even a meteorite crashing on California would not have saved the bears. Fate was actually well decided ahead of time. Market makers are the enemy within. Each one it's own. Israel has Hamas, we have the market makers.
我i168
2023-10-08
我i168
Make sense...esp in reteospect : )

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This was a surprise by most measures considering the trend in recent months showing a more obvious slowdown in the labor market.Naturally, the initial market reaction was met with a deep selloff in stocks and bonds, with the implication being that the labor market remains hot and can fuel inflation higher. A \"bearish\" interpretation is that the Fed will need to keep hiking, adding to the pressure toward higher rates and bond yields which are sitting at a near two-decade high.That being said, a funny thing happened. Stocks and bonds reversed those earlier gains with the Nasdaq-100 (NDX) and the S&P 500 (SPX) ultimately turning green on the day. There are several moving parts, but we think the payrolls represented a classic \"bear trap\" for the following reasons.The strong payrolls report does not mean job growth is \"re-accelerating.\"Data points do not undermine the inflation outlook.The ongoing decline in wage growth is a more favorable development.Oil price selloff helps to ease inflationary pressures.The upcoming CPI report is expected to show an ongoing slowdown in the core annual rate.The economy remains resilient, brushing aside fears of a deeper recession.The Fed is still unlikely to hike rates again.Source: YChartsJob Growth Is Not \"Accelerating\"Even with the apparent strength in payrolls during the month as per the official Bureau of Labor Statistics data, it's going to be hard to find anyone seriously suggesting job growth is accelerating.We can go through the data and point out how different industries like leisure and hospitality, which added 96k roles in the month, are balancing softer gains in more technical roles, but it's clear there was some monthly variability.What's more telling - the moving average over the four months at +226k has trended lower over the past year. There's a good case to be made that September was an outlier to the trend, drawing parallels to what we saw in January when the U.S. added +472k jobs, blowing out expectations at the time, only to reverse lower to +248k by February.In terms of hard evidence for an ongoing slowdown in the labor market, the latest private jobs market tracker through the \"ADP report\" showed the U.S. only added +89k roles last month, the lowest in more than two years. The point here is that the NFP print needs to be taken in the context of the broader economic environment and is less impactful to the macro setup than some may have feared.Source: Trading EconomicsWage Growth Slowdown Is More ImportantThe other key piece of data within the payroll report was the ongoing slowdown in wage growth, coming in at 0.2% m/m and below the 0.3% estimate. The annual rate of 4.2% has declined steadily over the past year and is now at the lowest level since 2021.This is important as it suggests even with the resiliency of the labor market, there does not appear to be new wage growth pressure. The CPI hit 9.1% in June 2022 and declined to a low of 3.0% this past July, while the economy added nearly 4 million jobs over the period. Our understanding is that job gains have not been a primary driver of inflation.We believe the Fed can look at this data point as further evidence the monetary policy strategy is moving in the right direction with the transmission effects of higher rates as ongoing. A mistake investors are making is assuming the Fed needs to, or wants, to \"crash\" the labor market as the only solution for the CPI to converge to the target level. Inflation already is trending lower and the labor market looks fine.Source: Trading EconomicsWhat Will The Fed Do?The takeaway for us is that the September payrolls report didn't change much in terms of inflation expectations or the direction of Fed policy. According to the CME FedWatch Tool, which translates Fed Funds futures pricing into implied probabilities, the consensus remains that the Fed will not hike again this year.The NFP print wasn't \"perfect\" but there are plenty of reasons to believe the group has already done enough to sufficiently tighten financial conditions.Source: CME FedWatch ToolThe next key data point will be the September CPI update, set to be released on Oct. 12. While the headline rate has ticked higher in recent months to 3.7% last month, we can point to the welcomed drop in oil prices, with WTI crude now down more than 13% from its recent high. This provides some relief to energy prices where they can correct lower into the October CPI update.The chart we are focusing on is the \"core-CPI\" which is the measure of inflation that excludes food and energy prices. The annual rate has been falling sharply in recent months and is likely the most critical measure the Fed is looking at.From the 4.3% rate in August, the current forecast is for another tick lower to 4.2% y/y in September according to the Cleveland Fed \"Nowcast.\" This considers what have been some favorable trends in categories like shelter with housing prices cooling off.It makes sense that the actual inflation data is more important to set inflation expectations than peripheral economic indicators that only indirectly affect consumer prices. Overall, we believe this favorable trend in the CPI should be enough to keep the Fed on hold and was not undermined by the jobs report.Source: Trading EconomicsWhat About Stocks?Going back to that market-implied probability for a Fed Rate hike this year, our take is that as it becomes more and more clear the Fed simply keeps rates on hold. The way we see it playing out is that favorable inflation data over the next couple of months should be enough to contain the spike in bond yields at the long end of the curve as a positive backdrop for stocks.We like the technical setup in the S&P 500 that's bouncing off a major level of technical support. The building consensus that the economy remains resilient and there's room for inflation to continue trending lower can take the broad market index right back to its recent high of around $4,600 as our year-end price target.In terms of risks, much of this would be undermined by some evidence that inflation really is accelerating, but just aren't seeing that right now. Into the Q3 earnings season, it will be important for companies to continue demonstrating the ability to maintain profitability and underlying margins.Source: Finviz","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":228272206209032,"gmtCreate":1696737714229,"gmtModify":1696738263588,"author":{"id":"4128399415320522","authorId":"4128399415320522","name":"MagNet","avatar":"https://static.laohu8.com/default-avatar.jpg","vip":1,"crmLevel":3,"crmLevelSwitch":1,"idStr":"4128399415320522","authorIdStr":"4128399415320522"},"htmlText":"Just the usual market manipulation by market makers. That s how they make easy money ! They are blood suckers, and the wallstreet mafia. They had already decided of the next market move before the NFP result. Even a meteorite crashing on California would not have saved the bears. Fate was actually well decided ahead of time. Market makers are the enemy within. Each one it's own. Israel has Hamas, we have the market makers.","listText":"Just the usual market manipulation by market makers. That s how they make easy money ! They are blood suckers, and the wallstreet mafia. They had already decided of the next market move before the NFP result. Even a meteorite crashing on California would not have saved the bears. Fate was actually well decided ahead of time. Market makers are the enemy within. Each one it's own. Israel has Hamas, we have the market makers.","text":"Just the usual market manipulation by market makers. That s how they make easy money ! They are blood suckers, and the wallstreet mafia. They had already decided of the next market move before the NFP result. Even a meteorite crashing on California would not have saved the bears. Fate was actually well decided ahead of time. Market makers are the enemy within. Each one it's own. Israel has Hamas, we have the market makers.","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":7,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/228272206209032","repostId":2373321616,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"},{"id":228159592780032,"gmtCreate":1696727982942,"gmtModify":1696727987709,"author":{"id":"3563873670221480","authorId":"3563873670221480","name":"我i168","avatar":"https://static.tigerbbs.com/34b2d0551b5ab028c13ab35747c4df8c","vip":1,"crmLevel":5,"crmLevelSwitch":1,"idStr":"3563873670221480","authorIdStr":"3563873670221480"},"htmlText":"Make sense...esp in reteospect : )","listText":"Make sense...esp in reteospect : )","text":"Make sense...esp in reteospect : )","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":10,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/228159592780032","repostId":2373321616,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"isCommentEnd":false,"newsSizeData":{"likeSize":25,"commentSize":2,"repostSize":3,"favoriteSize":4,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2373321616"}