Jobs & Fed's Good Cops Raised US Market ?
I woke up greeted by “good news” about the US stock market, on the morning of 04 Apr 2024.
What happened to US market that was still in the red when I decided to hit the sack?
Let’s see what alibi the media has to report.
(1) ADP Non Farm Payroll.
Hiring in the private sector increased more than expected for March 2024. (see above)
According to ADP employment report, it was the biggest jump since July 2023.
Private payrolls rose by 184,000 jobs last month, advancing more than economists’ estimate of 148,000.
It was also ahead of February’s upward revision of 155,000 jobs.
Note: ADP's private employment report will not be an “accurate” predictor to the official US Non Farm payroll report (and it should not be expected to be).
Nevertheless, it offers insight into the labour market.
More importantly, it “has” a bearing on interest rate expectations.
That is the reason why US market rejoiced with the latest ADP non farm payroll dataset.
(2) US Services PMI.
The headline number was 51.7%, clearly indicating continual expansion in the service sector; as a reading above 50 suggests growth.
This is a slight decrease from February's data of 52.3%, showing there's still growth, just that the pace has slowed.
Overall, March 2024’s Services PMI suggests US economy is still expanding, but moderately.
A slowing US services industry growth in March (means falling prices paid by businesses, is at a 4 -year low) is “good” news for inflation outlook.
(3) The Fed - Good cop, Bad cop.
In the span of a few hours on Wednesday, the Fed members were in full action, engaging the media.
08:30 am. Bostic on CNBC where he fired the first salvo predicting a single interest cut in later 2024.
12:00 noon. Goolsbee’s 3 rate cuts in 2024 are “in line with his thinking”. despite higher-than-expected inflation readings in January & February,
12:10 pm. Powell spoke at Stanford University where he said the Committee is near a pivot toward interest cut in 2024, with the timing uncertain - largely dependent on what the economic data says.
4:30 pm. Kugler hopes for diminishing inflation, without a broad economic slowdown - opening the door for rate cuts to start in 2024.
It’s all in a day’s work for these Fed members to assume the role of the “good” cop versus the “bad” cop role undertaken by Fed members Loretta Mester on 02 Apr 2024, that has rattled US market.
(4) US March NFP: Forecasts.
US February 2024 - Non Farm Payroll statistics 275K jobs
Unsure if forecast for coming Friday’s US Non Farm Payroll (March 2024) played a part in bolstering US Market on Wed, 03 Apr 2024?
Reuter’s survey has market estimates hovering around 200,000 jobs.
Economists polled by FactSet expect Bureau of Labor Statistics to report a gain of 170,000 jobs in March.
Both forecasts are coming in lower than 2024 actuals released so far, namely - 275,000 jobs (Feb 2024) & 353,000 jobs (Jan 2024).
Get ready to pop the champagne, should US’s March non-farm payroll data falls inline with forecast?
Strike While The Iron Is Hot?
Did you get into action when US market was on the verge of recovery?
I decided to place a “Buy” for $SoFi Technologies Inc.(SOFI)$ before going to bed.
At the point of submission, SOFI was trending down while the 3 Composite indexes were bouncing between gains & neutral.
I got it at $7.42 a share. When market closed, it was $7.54, a +1.60% gain — a few hours after submission.
Looking at pre-market pricing, SoFi is expected to open +1.06% higher, at $7.62 per share. Yay!
So, Why SoFi?
According to a post by InvestorPlace dated 02 Apr 2024:
SoFi could skyrocket in the coming months.
It has been trading around the $7 price range, since the beginning of 2024.
Although it may take a while for the stock to rally, it will be worth the wait.
More importantly, SoFi has shown strength in its Q4 2023 earnings.
It reported its first-ever GAAP profit on the back of +34% rise in Revenue to $594 million, and a net income of $47.9 million.
Apart from its topline growth, SoFi had a “strong member growth” to show for too.
In 2023’s last quarter, membership surged +44% YoY.
The fintech company ended 2023 with 7.5 million members.
It endeavours to add at least 1.0 million members each quarter.
My Viewpoints: (mine & mine only)
Although not mention in the above post, I think the biggest “mis-giving” US market has over SoFi was its recent Convertible Note Offering issuance.
Market was mostly negative and suspicious about its issuance, at a time when the Fintech Bank just reported its first profit. Why?
SoFi has issued convertible bonds worth up to $862.5 million.
The bonds function like debt, where buyers are paid interest in exchange for holding them.
The twist is buyers have the option to convert their bonds to common shares, further down the road.
Wall Street punished SoFi by selling its shares and revising its price target.
Personally, I like that SoFi:
Has its own game plan and strategy.
March to its own tunes, tuning out unnecessary noises and focus on growing its customers base.
It starts to build a relationship with the younger demographic since young.
And they aim to enhance their customers’ banking experiences.
Offering an Apps that makes it so easy to:
Invest.
Save.
Borrow.
Even budget.
With its suite of finance and lending products, to help drive growth for the Fintech Bank.
The litmus test for SoFi to take flight will be its Q1 2024 earnings results on Mon, 29 Apr 2024.
More than interesting, it sets SoFi’s track for 2024. Fingers crossed!
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