A job for you, and you, and… you

Stocks rallied for another session yesterday, still hanging on the words, if you could call them that, of Jerome Powell. Bulls need to stretch their legs after lying low for so long, but that may not mean a run is pending.

Empty your pockets. Is it Friday already? Oh boy, this has been a week chock-a-block with market-influencing information. First, let’s remember that October ended, and November began. Professional money managers logged a soggy October, and the clean slate of a new month gives them a fresh opportunity to make up some losses. Professional managers typically come out of the gate strong in the early days of a new month following a really bad one.

Second, we are at the height of earnings season. While we are seeing a solid trend of beats, many managers are asking themselves if the bars were set too low? If you followed estimates in the weeks prior to earnings season, many of them were lowered in anticipation of slowing growth. So, one might say “a miss is a miss by any other name… beat included.” Sorry Shakespeare. This season has been all about guidance, and there have been some negative surprises… but also some positive ones. This season will be one where the cream should rise to the top. In other words, there are recognizable discrepancies between companies in the same industry. For example, just because one semiconductor company gave strong forward guidance, it doesn’t mean that every semiconductor company will do well… and rally. Pay attention to this.

Third, Consumer Confidence beat consensus estimates with expectations of the future expectations rising. That is good news for the economy but possibly bad news for the Fed, which would like to see the economy take a coffee break to allow inflation to moderate. So, if you are a long-term focused investor (which I am a staunch advocate of), it is good news, but if you are impatient and unwilling to wait for your dessert, the news may be worrisome.

Fourth, the Fed was apparently not so concerned about the rise in consumers’ level of confidence as it decided to keep rates unchanged. This was largely expected. Markets were also not expecting the Fed to say anything dovish. On the contrary, most were expecting a “hawkish pause” similar to the ones we have been getting, including me. While the pause did include some hawkish verbiage to leave all options on the table, there were some slightly less-than-hawkish nuances to the Chairman’s post-release discussion. This prompted a drop in Treasury yields and a 2-day stock rally.

Finally, we get to the labor market. This is one of the Fed’s last stands on justifying its harsh monetary stance. It used a weak labor market to justify keeping rates lower for longer right after the pandemic… remember that? It’s hard to believe, but it happened, trust me. Now the Fed is holding out on higher rates longer until it sees weakness in the labor market. Go figure. This is jobs week, and it all leads to today’s monthly release. Earlier in the week ADP reported a weaker than expected +113k new jobs last month, slightly weaker than expected, but still higher than last month’s +89k additions. Job openings, according to the JOLTS release remain elevated and remain near enough to record highs to ignore them (there are 9.553 million job vacancies). The weekly employment numbers came in bigger than expected, which is good, if you are hoping for layoffs… like the Fed. On Monday, we learned that the Employment Cost Index climbed by +1.1% last quarter, which is higher than the prior quarter. This might be bad news in the Fed’s eye, but being that it represents last quarter, perhaps we can assign less weight to it. A more current assessment of the US labor market will come this morning when we get the official Nonfarm Payrolls number for October along with the latest calculation of the Unemployment Rate. The former is expected to have moderated from the prior month, while the latter is expected to remain unchanged at 3.8%, which is quite healthy by historical standards.

So, have the bulls gotten ahead of themselves in the past 2 days. Unfortunately, it is too early to tell. Indexes have certainly improved from a technical perspective in the past few days, but as you may know, technical analysts are constantly looking for confirmation before fully committing. The markets’ response to today’s releases could certainly provide some of that… or not. Next week is a light week for economic releases but still full of corporate release. Sometimes quiet is good… sometimes not. Pay close attention, remain patient.

WHAT’S BRISTLING IN THE EARLY HOURS

Monster Beverage Corp (MNST) shares are higher by +3.55% in the premarket after it announced that it beat EPS estimates last quarter. The company attributed the strong showing to increased price points, lower transportation costs, and reduced costs for aluminum cans. Seems like business as usual, except for the part about increased price points . Good for Monster, though. Potential average analyst upside potential: +15.2%.

Expedia Group Inc (EXPE) shares are rallying by +10.29% in the premarket after the company announced that it beat EPS and Revenue estimates for last quarter. The company also announced a $5 billion share buyback, which is always welcomed by investors. Potential average analyst upside potential: +33.1%.

YESTERDAY’S MARKETS

NEXT UP

• Change in Nonfarm Payrolls (Oct) is expected to come in at +180, lower than last month’s blowout +336k new hires.
• Unemployment Rate (Oct) is expected to have remained at 3.8%.
• ISM Services Index (Oct) may have slipped to 53.0 from 53.6.
• That should be enough to keep markets busy for the day. Next week brings another busy earnings release schedule light with economic releases. Check back in on Monday for weekly calendars with all the details.