Sure, the market gave up big gains yesterday, but it rallied back into the close, ahead of this morning's jobs report. Each of these job releases feel like a do-or-die situation and today is no different. On the contrary, considering the wild swings in the market and ambiguous comments from the Federal Reserve, it feels like today could make-or-break the market.
Let's begin with the fact that the street isn't expecting a great report to begin with. If there is more mediocrity, I think it would be difficult for the Fed to take a victory lap in the form of a rate hike, but the scuttlebutt is that they are looking for any excuse. Ironically, considering how dovish this Fed is, it goes to the notion that Janet Yellen doesn't want Wall Street pushing her around, and will ignore three weeks of temper tantrums.
So, what is a good report these days?
I suspect a total non-farm number above 250,000; unemployment rate that goes downhill, even as participation rate goes up. I guess that could get the Fed to move, provided that the wage needle moves, but not in a pedestrian manner that has confounded Main Street.
Jobs Report Forecast | Consensus | Preceding |
Total Non-Farm | 219,000 | 210,000 |
Private Payroll | 205,000 | 210,000 |
Unemployment Rate | 5.2% | 5.3% |
Average Weekly Hours | 34.5 | 34.6 |
This is very critical. I think a Fed rate hike on sustained and consistently improving economic data would be fine. I even like the idea of challenging the babies of Wall Street. On the other hand, hiking rates to prove independence would be a major mistake.
Maybe the Fed will assume that a month from now, the August number will be ratcheted up higher. I do wonder if the Fed will play along with the bogus unemployment rate, which Yellen admitted was skewed (it's actually more than that, but I'll avoid using four-letter words). There is something deeply wrong when millions of Americans skip the job market altogether for the safety and the comfort of their sofa and the latest version of Grand Theft Auto.
So, cue up the drum roll and hang onto your hat- its jobs day!
Today's Session
So much for the street rooting for bad news- it got it and right now equity futures are significantly lower. Of course these days multi-hundred point turns have become commonplace, so anything can happen although ahead of a three-day weekend, would be a tall order. Just as tall an order the idea the Fed can hike rates in September. Even if there is another 75,000 added to the August jobs tally (average revision over past few years) this wouldn't be a robust number.
Consider only 140,000 private sector jobs were created last month. It's really tough to rationalize this although the media will brag about the unemployment rate being at seven year lows. By now, most people understand that's a function of smoke and mirrors. It should be noted that in the past, we've seen abrupt turns when all the Pharaohs of Wall Street return to work after Labor Day.
There are lots of oversold stocks, but that's not the problem. The issue is turning out of a nosedive which is where the markets are after breeching important support points. I continue to caution cheap stocks can get cheaper. It means you have to grin and bear it with quality names knowing that fundamentals don't matter when emotions take over but always matter in the long run.