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Briefing.com Summary:
*JOLTS Report and Beige Book Report solidify September rate cut expectations.
*Q2 productivity hits a sweet spot, along with unit labor costs.
*Mixed response to earnings results from CRM, HPE, AEO, CIEN, and FIG.
The stock market's burner has been set to simmer this morning, as market participants try to get a feel for what might be cooking today. Currently, the S&P 500 futures are up eight points and are trading 0.1% above fair value, the Nasdaq 100 futures are up 37 points and are trading 0.1% above fair value, and the Dow Jones Industrial Average futures are down six points and are trading fractionally below fair value.
Yesterday produced some gains and some losses, but importantly for this market's mood, it also produced another round of buy-the-dip interest late in the day and a strong belief that the Fed will cut rates at the September FOMC meeting.
The weak JOLTS—Job Openings Report for July solidified that view, along with a Beige Book report that revealed little or no change in growth across most Federal Reserve districts from the prior report. The CME FedWatch Tool shows a 97.6% probability of a 25-basis-point rate cut in September.
Economic data is a focal point again this morning, along with some earnings news, but none of it has been a major swing factor for buyers or sellers in the early going.
- The ADP Employment Change for August was 54,000 (Briefing.com consensus: 69,000) versus an upwardly revised 106,000 (from 104,000) in June. The goods-producing sector saw an increase of 13,000 positions, while the service-providing sector saw an increase of 42,000 positions. The change by establishment size was modest across the board: small (+12,000), medium (+25,000), and large (+18,000).
- The key takeaway from the report is that it reflects a labor market that has weakened but which is not weak per se; nonetheless, this modest change will reinforce the market's rate-cut belief.
- Initial jobless claims for the week ending August 30 increased by 8,000 to 237,000 (Briefing.com consensus: 232,000). Continuing jobless claims for the week ending August 23 decreased by 4,000 to 1.940 million.
- The key takeaway from the report is that there still isn't a strong weakening message being delivered by initial jobless claims, which were up from the prior week but still remain relatively low on a historical basis.
- Q2 productivity was revised up to 3.3% (Briefing.com consensus: 2.4%) from the advance estimate of 2.4%. Q2 unit labor costs were revised down to 1.0% (Briefing.com consensus: 1.6%) from the advance estimate of 1.6%.
- The key takeaway from the report is that it hit a sweet spot of signalling stronger productivity growth and a modest increase in unit labor costs.
- The July trade deficit widened to $78.3 billion (Briefing.com consensus: -$64.2 billion) from an upwardly revised $59.1 billion (from -$60.2 billion), with exports being $0.8 billion more than June exports and imports being $20.0 billion more than June imports.
- The key takeaway from the report is that the surge in imports reflects an easing of some of the tariff pressures that had been applied by the announcement of higher reciprocal rates. The downside, however, is that the net export component will be a negative component in the calculation of Q3 GDP.
The earnings news featured results from Salesforce (CRM), Hewlett-Packard Enterprise (HPE), American Eagle Outfitters (AEO), Ciena (CIEN), and Figma (FIG). The response to those results has been mixed, with CRM and FIG down sharply, and HPE, AEO, and CIEN up sharply.
The mixed action is in keeping with the demeanor of the equity futures market. That doesn't mean it is bad. On the contrary, there is continued resilience to selling interest at the index level, which is notable given how far the indices have run off their April lows.
