We should get some answers next week with the Presidential election and the Fed but the jobs numbers reported on Friday introduce some uncertainty.
The payroll number was a paltry +12k which was likely influenced by the Boeing strike and two hurricanes. However, the September and August numbers were revised down a combined 112k and that has nothing to do with the weather or a strike. The weakest print since 2020.
Perhaps the Fed’s hawkish policies over the last 18 months are finally starting to affect the labor markets. I noticed the adjacent chart released on Friday by the BLS that shows the number of people unemployed 27 weeks or longer. As you can see, it has been rising all year and warns of a weakening labor market trend that may be finally showing up in the payroll numbers.
One more thing, if you compare the most recent trajectory, you can see it looks a lot like the rise into the 2008 recessionary period. This will be closely watched in the coming months and probably points the Fed in the direction of additional rate cuts.
The S&P 500
Earnings reports are showing another good quarter but the projected outlook by some companies are not as uniform so a divergence in sector earnings into 2025 may be on tap. As you may recall from my post last week (Payrolls, Election, Fed), the S&P looked to be forming a diagonal chart-pattern as you can see in the upper right hand corner. Diagonal pattern end in dramatic fashion as they swiftly return to its origin when completed. In this case that would be the August low at $510 which is almost 11% lower from Friday’s close.
As you can see, the S&P broke the lower trend line of the diagonal on Thursday and Friday’s price action failed to snap higher so more selling may be in store next week. The momentum indicators at the bottom of the chart are also rolling over so the uptrend is weakening. If my interpretation of the S&P chart is correct, we should see some follow-thru to the downside early next week.
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President, Kisco Capital
