Continued Employment Growth Weighs Down Futures

Articles From: Briefing.com
Website: Briefing.com

The stock market had a good showing to begin the week but found some resistance over the past two days amid ongoing concerns about geopolitical tensions, fluctuating expectations regarding the Fed’s rate hike path, and the expected impact on growth. The S&P 500 enters today with a 4.4% gain for the week while the Nasdaq has climbed 4.7% since last Friday, but these gains will be moderated at the open, as futures on the S&P 500 trade 40 points, or 1.1%, below fair value.

Fed officials have made it clear that the labor market is expected to soften, and some of that was seen in Tuesday’s release of the Job Openings and Labor Turnover Survey, which showed that the number of job openings fell by more than a million in August. However, today’s release of the Employment Situation report for September reflected continued growth in headline employment and monthly average hourly earnings, giving the Fed room to continue its aggressive rate hike campaign.

Looking at the details:

  • September nonfarm payrolls increased by 263,000 (Briefing.com consensus 250,000). The 3-month average for total nonfarm payrolls decreased to 372,000 from a revised 382,000 in August. August nonfarm payrolls were left unrevised at 315,000. July nonfarm payrolls revised up to 537,000 from 526,000.
  • September private sector payrolls increased by 288,000 (Briefing.com consensus 275,000). August private sector payrolls revised down to 275,000 from 308,000. July private sector payrolls revised down to 448,000 from 477,000.
  • September unemployment rate was 3.5% (Briefing.com consensus 3.7%), versus 3.7% in August. Persons unemployed for 27 weeks or more accounted for 18.5% of the unemployed versus 18.8% in August. The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 6.7% versus 7.0% in August.
  • September average hourly earnings were up 0.3% (Briefing.com consensus 0.3%) versus up 0.3% in August. Over the last 12 months, average hourly earnings have risen 5.0%, down from 5.2% for the 12 months ending in August.
  • The average workweek in September was 34.5 hours (Briefing.com consensus 34.5), versus 34.5 hours in August. Manufacturing workweek was little changed at 40.3 hours. Factory overtime held at 3.2 hours.
  • The labor force participation rate dipped to 62.3% from 62.4% in August.
  • The employment-population ratio held at 60.1%.

The understanding that the report is unlikely to soften the Fed’s rate hike path has sent equity futures to lows while the dollar is showing continued strength against the euro and Sterling.

Treasuries started the day on a lower note with shorter tenors pacing the retreat, and they have added to their losses in reaction to the report. The 2-yr yield is up ten basis points at 4.33%, on the verge of hitting a fresh high for the year, while the 10-yr yield is up eight basis points at 3.90%.

In other news, markets in China will reopen on Monday after this week’s closure while equity indices in Japan and South Korea will be closed to start next week. In Europe, Credit Suisse (CS 4.45, +0.16, +3.7%) offered to buy back up to $3 bln worth of debt and British Prime Minister Truss refused to rule out the possibility for widespread blackouts during the winter if her country fails to import enough energy.

President Biden told donors at a New Jersey fundraiser that, “First time since the Cuban missile crisis we have a direct threat of the use of nuclear weapons if in fact things continue down the path they are going.”

Chipmakers are likely to see some early weakness after AMD (AMD 64.32, -3.53, -5.2%) lowered its Q3 revenue and gross margin guidance due to sluggish demand. Shares of AMD have given back this week’s gain in pre-market while the PHLX Semiconductor Index was up 8.8% for the week at the end of yesterday’s session.

Originally Posted October 7, 2022 – Continued employment growth weighs down futures

Disclosure: Interactive Brokers

Information posted on IBKR Campus that is provided by third-parties does NOT constitute a recommendation that you should contract for the services of that third party. Third-party participants who contribute to IBKR Campus are independent of Interactive Brokers and Interactive Brokers does not make any representations or warranties concerning the services offered, their past or future performance, or the accuracy of the information provided by the third party. Past performance is no guarantee of future results.

This material is from Briefing.com and is being posted with its permission. The views expressed in this material are solely those of the author and/or Briefing.com and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

Disclosure: Futures Trading

Futures are not suitable for all investors. The amount you may lose may be greater than your initial investment. Before trading futures, please read the CFTC Risk Disclosure. A copy and additional information are available at ibkr.com.