Here's one holiday shortened week that will not see responsible money managers taking Friday off. This is one Friday that will require your full attention. The Employment Situation Report for June will guide on the state of labor and the economy, and thus Fed policy. Plus, President Trump is at the G20 in Germany, with international trade, climate change, Russia relations, North Korean aggression, China relations and the Qatar crisis all on the table. Finally, a volatile energy market eagerly awaits the latest rig count data from Baker Hughes. Yeah, so save my place on the beach, because I'll be a little late today.
The so-called granddaddy of all economic reports is due this morning, the Employment Situation Report. Economists are looking for unemployment to hold at a 4.3% rate in June, still indicative of full employment. Any slight increase in the unemployment rate is unlikely to have much of an impact on the market today. However, a further decrease in the rate to 4.2% should be viewed positively given recently strong economic indications from ISM's manufacturing and nonmanufacturing indices.
Nonfarm payrolls are expected to have increased by 170K, versus the 138K increase in May. Private nonfarm payrolls are expected to have increased by 164K, a bit less than ADP's estimate for 158K. A lower rate of job creation is to be expected at full employment. Thus, the market should not read negatively into a lower level here; economist's expectations should be lower in my view.
Perhaps the most important tidbit in this month's data will be the change in average hourly earnings and also the average workweek. Economists expect earnings rose 0.3%, versus the 0.2% increase last month. That would mark a 2.6% year-to-year increase in wages, and fire up inflation speak... The workweek is expected to hold at 34.4 hours. Any increase in the workweek also reflects well on the economy and has healthy inflation implications.
These days, every Friday is exciting, with the weekly Baker-Hughes Rig Count data reported at 1:00 PM. Last week's data was bullish, as U.S. rig count activity, especially for oil, stalled. Analysts have been lowering their forecasts for oil prices this year, but I believe they are mistaken. Improving economic data should lead to revisions to demand forecasts, and the Qatar crisis adds a factor possibility for an oil supply shock.
I will not attempt to foresee what may come of the G20 meetings. We know much could come of it, given all the hot topics on the table. Investors will welcome a quiet, controversy free gathering.
At roughly 5:00 AM EDT, asset securities were indicating as follows:
|SPDR S&P 500 (NYSE: SPY)||-0.9%||+0.1%|
|SPDR Dow Jones (NYSE: DIA)||-0.7%||NA|
|PowerShares QQQ (NASDAQ: QQQ)||-0.9%||+0.04%|
|iShares Russell 2000 (NYSE: IWM)||-0.9%||NA|
|Vanguard Total Stock Market (NYSE: VTI)||-1.0%||NA|
|iPath S&P 500 VIX ST Futures (NYSE: VXX)||+5.0%||NA|
|PowerShares DB US Dollar Bull (NYSE: UUP)||-0.4%||NA|
|PIMCO Active Bond ETF (NYSE: BOND)||+0.1%||NA|
|United States Oil (NYSE: USO)||+0.7%||-2.2%|
|SPDR Gold Trust (NYSE: GLD)||-0.04%||NA|
In conclusion, look to three key data points for direction today, the monthly jobs data, with its implications for the economy and the Fed; the G20 and all the hot topics on the table; and finally the Baker Hughes rig count data. If the data is not too disruptive, relief may have stocks meandering their way out of the week on light volume.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.