It has been some day already and the opening bell hasn't even sounded yet.
Apple (AAPL) is down 6.3% following its fiscal fourth quarter report and disappointing outlook; President Trump, according to Bloomberg sources, asked key officials to start drafting potential terms for a trade agreement with China at the G20 meeting; CNBC subsequently reported that its White House sources have said there is no truth to the Bloomberg report; and the Employment Situation Report for October was released.
The standing of the futures market made it clear that the trade news superseded Apple's news as a market driver. Asian markets rallied strongly overnight, led by the Hang Seng (+4.2%), and major European markets have all advanced with gains in the neighborhood of 1-2%.
At the top of the hour, the S&P 500 futures were up 26 points, the Nasdaq 100 futures were up 23 points, and the Dow Jones Industrial Average futures were up 342 points. They pulled back, though, on the CNBC report and pulled back further on the release of the solid Employment Situation Report.
The key takeaway from that report is that it is consistent with labor market trends that will keep the Federal Reserve on a tightening path. Nonfarm payroll growth is strong, the labor force participation rate is increasing, and most importantly, average hourly earnings growth is trending higher at 3.1% year-over-year, its strongest pace since April 2009.
That's good economic news that can perhaps temper some of the concerns tied to the peak-growth narrative. That may help explain why the futures market didn't necessarily unravel in the wake of the report.
The 2-yr note yield is up four basis points to 2.88% while the 10-yr note yield is up four basis points to 3.18%.
Currently, the S&P 500 futures are up 18 points and are trading 0.6% above fair value. The Nasdaq 100 futures are down six points and are trading 0.1% below fair value. The Dow Jones Industrial Average futures are up 242 points and are trading 0.9% above fair value.
Apple is an obvious drag on the Dow futures, yet relatively pleasing reports from Exxon Mobil (XOM) and Chevron (CVX), both of which are up 2.0%, have acted as a supportive influence.
The notable headlines from the Employment Situation Report are as follows:
- October nonfarm payrolls increased by 250,000 (Briefing.com consensus 190,000), unaffected by Hurricane Michael. Over the past three months, job gains have averaged 218,000 per month
- September nonfarm payrolls revised to 118,000 from 134,000
- August nonfarm payrolls revised to 286,000 from 270,000
- October private sector payrolls increased by 246,000 (Briefing.com consensus 185,000)
- September private sector payrolls revised to 121,000 from 121,000
- August private sector payrolls revised to 267,000 from 254,000
- October unemployment rate was 3.7% (Briefing.com consensus 3.7%) versus 3.7% in September
- Persons unemployed for 27 weeks or more accounted for 22.5% of the unemployed versus 22.9% in September
- The U6 unemployment rate, which accounts for unemployed and underemployed workers, was 7.4% versus 7.5% in September
- October average hourly earnings were up 0.2% (Briefing.com consensus +0.2%), after increasing an unrevised 0.3% in September
- Over the last 12 months, average hourly earnings have risen 3.1%, versus 2.8% for the 12 months ending in September
- The average workweek in September was 34.5 hours (Briefing.com consensus 34.5) versus a downwardly revised 34.4 hours (from 34.5 hours) in September
- October manufacturing workweek dipped 0.1 hours to 40.8 hours
- Factory overtime was unchanged at 3.5 hours
- The labor force participation rate was 62.9% in October versus 62.7% in September
Separately, the Trade Balance Report for September showed a widening in the trade deficit to $54.0 billion (Briefing.com consensus -$53.4B) from a downwardly revised $53.3 billion (from -$53.2 billion) in August.
That deficit stemmed from exports being $3.1 billion more than August exports and imports being $3.8 billion more than August imports. The deficit with China increased by $3.0 billion to $37.4 billion in September.
The key takeaway from the report is the same as last month in that it has yet to confirm the tariff actions are succeeding in cutting the trade deficit with China specifically and in general.