Stocks Climb and T-Note Yields Fall on Fed-Friendly Payroll Report

What you need to know…

The S&P 500 Index ($SPX) (SPY) this morning is up +0.79%, the Dow Jones Industrials Index ($DOWI) (DIA) is up +0.61%, and the Nasdaq 100 Index ($IUXX) (QQQ) is up +0.79%. 

Stocks this morning are moderately higher.  Stock indexes rallied, and T-note yields fell after today’s U.S.  Aug payroll report showed the unemployment rate unexpectedly ticked higher and wage pressures eased after average hourly earnings rose less than expected.  Also, U.S. July factory orders unexpectedly posted their biggest decline in more than 2-years, dampening expectations on how aggressive the Fed may need to be in tightening monetary policy.

U.S. Aug nonfarm payrolls rose +315,000, showing a stronger labor market than expectations of +298,00.  The Aug unemployment rate unexpectedly rose +0.2 to 3.7% versus expectations of no change at 3.5%, as the Aug labor force participation rate rose +0.3 to 62.4%, stronger than expectations of 62.2%.

U.S. Aug average hourly earnings rose +0.3% m/m and +5.2% y/y, a slower pace of increase than expectations of +0.4% m/m and +5.3% y/y.

U.S. July factory orders unexpectedly fell -1.0% m/m, weaker than expectations of a 0.2% m/m increase and the biggest decline in 2-1/4 years.

According to EPFR Global data, global equity funds had outflows of $9.4 billion in the week ended Aug 31, the fourth-largest redemptions this year.  U.S equities had outflows of $6.1 billion in the week to Aug 31, the largest outflow in 10 weeks.

Today’s stock movers…

Energy stocks and energy service providers are climbing today, with WTI crude up more than +2%.  Haliburton (HAL) and Marathon Oil (MRO) are up more than +3%.  Also, Exxon Mobil (XOM), Devon Energy (DVN), Phillips 66 (PSX), Schlumberger (SLB), Baker Hughes (BKR), Valero Energy (VLO), Diamondback Energy (FANG), and Marathon Petroleum (MPC) are up more than +2%.  In addition, Chevron (CVX) is up more than +1% to lead gainers in the Dow Jones Industrials.

Broadcom (AVGO) is up more than +4% today to lead gainers in the S&P 500 after reporting Q3 net revenue of $8.46 billion, above the consensus of $8.41 million, and forecast Q4 revenue of $8.90 billion, stronger than the consensus of $8.72 billion.

Lululemon Athletica (LULU) is up more than +10% today to lead gainers in the Nasdaq 100 after reporting Q2 adjusted EPS of $2.20, stronger than the consensus of $1.87, and raised its 2023 adjusted EPS forecast to $9.75-$9.90 from an earlier forecast of $9.35-$9.50, above the consensus of $9.45.

Okta (OKTA) is up more than +8% today after Guggenheim Securities upgraded the stock to neutral from sell.

U.S.-listed Chinese stocks are moving lower today on a Financial Time report that said Tencent Holdings would sell 100 billion yuan ($14.5) of its stock holdings as it shifts strategy. (JD) is down more than -3% to lead losers in the Nasdaq 100.  Also, Baidu (BIDU) is down more than -3%, and Alibaba Group Holding (BABA) is down more than -2%.  In addition, Pinduoduo (PDD) is down more than -1%.

Across the markets…

Dec 10-year T-notes (ZNZ22) today are up +12 ticks, and the 10-year T-note yield is down -4.1 bp at 3.212%.  Sep T-notes this morning are moderately higher after a bond-friendly U.S. Aug payroll report sparked short-covering in T-note futures.  The U.S. unemployment rate in Aug unexpectedly moved higher, and wage pressures eased as U.S. Aug average hourly earnings rose less than expected, which dampened expectations on how aggressive the Fed may need to be in tightening monetary policy.

The dollar index (DXY00) this morning is down -0.45% as it falls back from Thursday’s 20-year high.  A dovish U.S. payroll report today has pushed T-note yields lower and sparked long liquidation in the dollar.  Also, a rally in stocks today has curbed the liquidity demand for the dollar.

EUR/USD (^EURUSD) today is up +0.57%.  Weakness in the dollar today has sparked short covering in EUR/USD.  Also, European energy crisis concerns eased and gave the euro a boost after European nat-gas prices plunged more than -10% today to a 3-week low. 

Eurozone economic news today was bearish EUR/USD.  German July exports fell -2.1% m/m, the biggest decline in 4 months.  Also, German July imports fell -1.5% m/m, the biggest decline in 6 months.  In addition, Eurozone July PPI rose a record +37.9% y/y, stronger than expectations of +37.3% y/y.

USD/JPY (^USDJPY) today is down -0.05%.  The yen today recovered from a 24-year low against the dollar and moved slightly higher on jawboning from Japanese Finance Minister Suzuki, who said sudden moves in the yen are not desirable and that the currency market needs to be closely monitored.  Also, weaker T-note yields today are supportive of the yen.

October gold (GCV22) is up +12.0 (+0.71%), and September silver (SIU22) is up +0.199 (+1.13%).  Precious metals this morning are moderately higher.  A weaker dollar today is supportive of metals prices.  Also, today’s dovish U.S. payroll report was bullish for gold as it eases pressure on the Fed to aggressively tighten monetary policy. In addition, a decline in T-note yields today was positive for gold.  Gains in gold are limited due to the continued liquidation of long gold positions from funds after long gold positions in ETFs fell to a 6-1/2 month low Thursday.

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