Things you need to know ~
- NFP report is stronger, re-iterating what JJ told us
- Some investors are suffering from FOMO – but that’s because they try to time the market
- Oil is trading at $92/barrel up 22% since Joey started to empty the SPR
- And it’s Election week – 40 million early ballots have been cast, is the wave coming?
- Try the Italian style Sweet Sausage Stuffing for Thanksgiving.
So, the NFP report revealed that the job market is alive and well. We restored 216k jobs vs. the estimate of 200k jobs. Wages grew – just not at the same pace of inflation – which just means that workers continue to get hit over the head by rising prices. Unemployment ticked up to 3.7% and likely going higher – Twitter and META the latest to announce big job cuts. But let’s not forget that so many of their employees are not located in the US – right? 60% of META employees are non-US citizen (that’s ~52,000). They employ people all over the world – so I suspect that employment in India, and Eastern Europe will suffer as well. But we’re not counting those numbers and I wonder – are they canning US employees over non-US employees because the US employees are more expensive?
Not sure if any of their ‘metaverse’ imaginary people are targeted for layoffs, but I know the real universe employees have something coming. Now, the WSJ did make a point of saying that just maybe – we would see real estate prices in the bay area begin to retreat – even if for just a bit and that would be a positive, no?
In any event – laid off employees will get a generous RIF packages and most likely will get to keep their stock – so, let’s not get hysterical just yet. Many will find a new job relatively easily since the last JOLTS report revealed that there are north of 10 million available jobs – so, if someone WANTS a job – they should be able to find one….. so, let’s see how this shakes out.
Economists are suggesting is that we will need to see US unemployment reach 6% before this is over…..so get ready.. The lay off season has just begun….remember – companies do year end ‘housecleaning’ between now and the end of the year…financial services is well known for their ‘holiday layoffs’ – happens every November into December – and recall – both GS and JPM announced that layoffs are coming – the others soon to follow….We’ve also see it across the tech sector this year as well….so once they all start handing out those pink slips – watch what happens to the unemployment in December, January and February…..
We might get a short term offset from the retailers…they are expected to ‘hire’ seasonal help…Nordstrom’s is hoping to hire 20,000, Amazon is planning on hiring 15,000 – paying $3,000 bonuses and $19/hr. WMT is only planning on hiring 40,000 – which is down 75% vs. the 150,000 they hired last year, that’s because they want current employees to work longer hours. TGT is planning on hiring 100,000 and paying them $15/hr. Macy’s is looking for 40,000 workers as well. And all of these employers are offering shopping discounts for the new employees which is a big help considering that inflation is running at 40 yr. highs.
Mastercard is expecting seasonal holiday spending to be up by 7% but notes that inflation will certainly play a role in how that’s calculated….spending up but the number of gifts down….Consumers will look for ways to navigate this inflationary environment searching for deals and sales.
Now what the NFP report revealed is that JJ told us the truth- and that the economy remains hot and therefore will remain at risk of further hikes….so you ask – why did the markets rally? Simple – they heard news that was expected – there was nothing in that report that changed the narrative at all and stocks had sold off hard prior to the report…so strap in – rates will continue to rise until we get to the newest terminal (neutral) rate…which is now somewhere between 5% – 5.5%. (Up from the 4.6% that JJ had intimated.) At the end of the day – the Dow added 402 pts pr 1.2%, the S&P up 51 or 1.4%, the Nasdaq gained 132 or 1.3%, the Russell jumped by 20 pts pr 1.1% and the Transports gained 273 pts or 2.1%
US treasury yields surged higher and then backed off a bit…the 2 yr. ended the day yielding 4.67%, the 5 yr. 4.33% and the 10 yr. – 4.15%. – Yes, it’s still inverted! And no – we have not ‘averted’ a recession. That’s coming (or is it here already?)
Now rising rates will continue to be a headwind for stocks…..….something that we have been talking about for months now. And remember – there are some economists out there who think the FED must raise rates ABOVE the CPI rate to kill inflation…..and speaking of the CPI – get ready because that is just one of the data points this week….due out on Thursday…and the expectation if for us to see an INCREASE of 0.6% on the top line m/m (up from last month’s 0.4%) – but when you take out food and energy – it is supposed to be +0.5% – a slight decline from last month’s 0.6%. Y/y readings are expected be up 7.9% on the top line and +6.5% ex food and energy. Now both slightly lower than last month – which is convenient – considering that energy rose by 22% since October – but let’s see how they frame it….They’ll tell you that rents have come down along with housing prices – now housing yes, but not sure I’m seeing rent declines…NYC, Chicago, Miami and San Fran are just a few of the hot cities that are not seeing any rent declines yet…..But let’s remain hopeful.
Other eco data this week includes Mortgage apps on Wednesday and Real Avg Hourly Earnings y/y and Real Avg Weekly Earnings y/y.
But this week will not be dominated by economic or earnings data at all…it is election week – and election day is only 1 day away…the races are heating up – neck and neck really in all the ‘key states’ – AZ, PA, NY and GA.
The NYTimes runs with this headline and story
Americans Flock to Vote Early as Hints Emerge of Republican Strength
“Turnout is high in most states, and experts see broad Republican energy as well as Democratic enthusiasm in major battlegrounds……Anxious and polarized Americans have swarmed early voting locations and returned mail ballots in droves, casting more than 32 million votes as of Thursday as turnout in most states keeps pace with the record levels of the 2018 midterm elections and voters navigate heightened tensions over the democratic process.”
“32 million ‘early votes’ have been cast – turnout keeping pace with record 2018 levels..” So, tell me again how early voting doesn’t work? In fact – I voted on Friday – made my appointment online, showed up at the polls, had to show my ID to prove I was who I said I was and that I had a heartbeat and then I was given a ballot, I put it into the voting machine, made my selections and then brought it to the ballot counting machine where I entered it into that machine and watched as my vote was counted….Simple – the whole process took me 20 mins start to finish….and I will say – it was very secure.
Why there isn’t one system that is used by the entire country is a question I continue to ask, Why we can’t have a consistent voting system in this country is beyond me…..– Florida did it right…it was simple, technologically sophisticated, clean and quick – Period.
Oil which surged up and thru $90/ barrel on Thursday did close out the week even higher at $92.60. We are now up and thru all 3 trendlines – so $88 ish becomes support with $100 resistance.
US futures are up this morning…Apple is under some pressure – down just 1% – on the news that the iPhone 14 production has been ‘temporarily reduced’ due to more covid restrictions in China. Suggesting to consumers that IF you by chance wanted an iPhone 14 for Christmas/Hannukah then you better get your order in…you see – that’s how they create iPhone hysteria – by telling you, you can’t get it….the same way retailers have been telling you to start you shopping early – otherwise you risk missing out….It’s a joke really. But it works every time…..
At 6 am we see the Dow futures are up 165 pts, S&P’s up 20, the Nasdaq is ahead by 60 pts and the Russell is up 11 pts.
Like I said – there are no economic reports today and tomorrow is election day….expect much of the conversation to revolve around the choice that American’s are about to make – There are some that are now suggesting that recent rate hikes are working (thus thinking that a FED pivot is on the horizon – which I think is completely ridiculous), you also have others that are betting that a change in leadership will be favorable for the markets – especially since we have seen such value destruction in certain sectors.
In Europe – markets across the region are also up…. At 6 am markets across the region are up by 0.5%
The S&P closed at 3770– up 51 pts…and looking to rally again today….3805 is the first resistance point followed by 3900 – a change in leadership will most likely lead to a rally – the depth of it dependent upon how much of a drubbing the Dems take….will they lose control of both chambers or just the house? Will Joey then come to the middle now that he is expected to become a ‘lame duck”? What will the progressive left have to say then? It’s all very complicated, but remember – politics don’t price stocks in the long run, a strong economy does.
Sit tight as a long-term investor – stick to the plan – I suspect we will see that year end rally if we see a flip in congress…. Look beyond the next 6 weeks and instead focus on the next 6 – 12 months…..Look at the mega cap, multinationals that generate good cash flow, pay nice dividends and can weather the storm. Remember – buy the STPN (Stuff that People Need). Energy, Healthcare, Consumer Staples, Utilities and some big megatech – NOT social tech!
Take good care,
Chief Market Strategist
kpolcari@slatestone.com
Italian Style Sweet Sausage Stuffing
For this you need – Garlic -sliced, Onions- diced, cubanelle peppers – chopped, s&p, Sweet Sausage meat (out of the casing), celery – diced, Italian bread- cut into cubes, chicken broth, mashed potatoes, Olive oil, and white wine
Cut up the Italian bread into cubes – maybe like 1 cup and set aside.
In a lg sauté pan – heat up the olive oil and sauté the garlic, onions, cubanelle peppers & celery until soft – maybe 10 mins…now add in the sausage meat and brown nicely (using the back of a fork to break it up as it cooks). Season with s&p Next add in a cup of chicken broth and a splash of white wine (this is optional) – If you don’t add it to the mix then pour yourself a glass – and let it all simmer together. Remove from heat and let it cool.
Next up – mix 2 cups of mashed potatoes along with the bread into the sausage mixture and mix well. Now transfer the mixture to a lg buttered baking dish and bake in the oven – uncovered for 20 mins on 325.
