We got a jobs number that was a disappointment on Friday which raises more questions about what the Fed will do at their November meeting. Already on Friday I was seeing talk of a “Dovish Taper” which means the Fed may not be so quick to reduce their bond purchases later this year. With the September jobs data behind us, the market is likely to put more weight on Q3 earnings that kick-off this week with the banks and financial institutions. Expectations are that many sectors will report good numbers as companies pass-thru cost increases to customers which is good for their margins. However, other sectors like auto manufacturing are unable to deliver finished cars as semiconductors are in shortage. It should be an interesting earnings season but any color on hiring activity and the labor market within the upcoming earnings reports should provide clues on the amount of taper in the by the Fed at the November meeting.
The stock market has been in a corrective pullback the last 5 weeks (the longest in the past year) and it looks as though the S&P is trying to put in a bottom over the last week. However, bottoms are confirmed with higher prices so there is still some work to do in the chart – a move above 4422 early this week would confirm the bottoming scenario. However, I also think that we need confirmation in the earnings data before we put the month of September in the rearview mirror and see new all-time highs.
Chart of the Week!
This radial Sankey diagram using data from the EIA (Energy Information Administration) breaks down U.S. energy consumption in 2020, showing us how much each sector relies on various energy sources. (Visual Capitalist)
Economic & Central Banking Snippets
- There are other signs of strong labor demand as the average workweek jumped to 34.8 hours from 34.6. Average hourly earnings also surged 0.6%, and by 0.7% among non-management leisure and hospitality employees.
- The September headline payroll number totaled just 194k which was about 300k less than expected but was offset by an upward revision from the two previous months of 169k. One silver lining was the private sector that added 317k new net jobs.
- Another negative in the labor report was that the labor force participation rate came in at 61.6% from 61.7% in August.
- The Atlanta Fed’s Q3 GDP forecast is now down to 1.3% from 6% just two months ago.
- The Reserve Bank of New Zealand raised interest rates by 25 bps to .50% as expected and laid the groundwork for more.
- The Reserve Bank of India surprisingly ended QE cold turkey with no taper. This is a country that is highly sensitive to inflation with its low per capita income.
- According to the Manheim Used Vehicle Index, prices went up 5.3% m/o/m in September and is up 27.1% y/o/y. The index is at a fresh record high.
- The push for a global corporate tax rate got a big boost after holdout Ireland agreed to hike its taxes from 12.5% to the proposed global level of 15%. Ireland’s low tax rate has attracted big tech firms like Facebook and Google to build European headquarters in Dublin.
- Tesla will officially move its headquarters from Silicon Valley in California to Austin, Texas.
- China has ordered coal miners to boost output to counter a national energy crisis. The order affects 72 mines in Inner Mongolia, and will increase production by 3%.
- Samsung announced its earnings guidance for the 3rd quarter, saying its profits likely rose 28%. The global chip shortage helped boost the world’s biggest smartphone and memory chip maker.
- Ford will suspend production for two days at a Mexico plant because of material shortages, according to Reuters.
That is all for now and thank you for being a subscriber!
President – Kisco Capital