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Today’s regular stock market trading session was flat overall, following the worst single day for tech stocks in two years. Employment numbers inch closer, but until they do, the market looks reluctant to push or pull too severely in either direction. The Dow was +0.09% today, the S&P 500 -0.16%, the Nasdaq -0.30% and the small-cap Russell 2000 -0.19%.
One thing we saw today is the apparent end of the bond-yield inversion after two-plus years: the 10-year rate is currently at +3.766% and the 2-year is now +3.763% — the first time since July 2022 that short rates are lower than long rates. (Yield-curve inversions are historically red flags for economic recession, though we’ve managed to avoid one of those since the first two quarters of 2020.)
These bond yields do jump around a bit over time, but it’s a solid bet that even if we see slight inversions over the next couple weeks, a cut to the Fed funds rate (on September 18th) — especially one of 50 basis points (bps) instead of 25 bps — will put an end to this cycle. And hopefully fears of a recession with it.
JOLTS Falls Sharply in July
The Job Openings and Labor Turnover Survey (JOLTS) for July came in at 7.67 million job openings, well below the 8.1 million expected and beneath the downwardly revised 7.91 million for the previous month. This is the smallest tally we’ve seen since January 2021, and -28.7% lower than the March 2022 highs of 12.2 million job openings.
A total of 5.5 million hires in the month was slightly up month over month. The hiring rate ticked up 20 bps in July to +3.5%, while Job Quits bumped back up to +2.1% from a downwardly revised +2.0% for June. Healthcare and Social Assistance shed the most job openings, -187K, offset largely by +178K growth in Professional/Business Services.
In short, the labor market continues to tighten. These numbers do not appear to beg for a 50 bps rate cut at the September 18 Fed meeting, but depleted numbers from private-sector payrolls in the ADP (ADP - Free Report) report tomorrow and the Employment Situation figures from the U.S. government Friday morning may help get this ball rolling.
Beige Book Shows More Declining Regions
The Fed has also put out a new Beige Book for August this afternoon. Think of this as sort of a report card for the 12 cities that have a Federal Reserve office. The number of cities with flat or declining economic conditions fell to nine from five the previous report.
Only Boston, Chicago and Dallas posted economic gains among the 12-city survey last month. In the prior Beige Book, only Minneapolis posted negative growth, but this time around it was Philadelphia, Cleveland, Richmond (VA) and Atlanta were among those regions slightly losing ground. Consider this more grist for the 50 bps-cut mill.
Quarterly Earnings Roundup: HPE, AI
Hewlett-Packard Enterprises (HPE - Free Report) notched its ninth-straight positive earnings surprise, as its fiscal Q3 numbers were reported after the close today. Earnings of 50 cents per share outpaced the 46 cents in the Zacks consensus (and a penny ahead of the year-ago quarter), while revenues of $7.71 billion were nicely ahead of the $7.64 billion expected. Yet slight misses on overall Gross Margin and Intelligent Cloud have helped nudge a sell-off of -2.7% in late trading on the news.
C3.ai (AI - Free Report) , the enterprise services supplier with the good sense to choose the ticker symbol “AI,” is trading down -16% in today’s after-market, even after the company beat on its bottom line for fiscal Q1: -$0.05 per share versus -$0.13 expected. It’s now the 12th-straight earnings beat for the company, while the $87 million in quarterly sales was slightly below the $87.12 million anticipated. It’s subscriber rate also came in notably below estimates. Shares had already been down nearly -20% year to date.
Image: Bigstock
Fed Rate Cut Alert: The Case for 50 bps?
Wednesday, September 4th, 2024
Today’s regular stock market trading session was flat overall, following the worst single day for tech stocks in two years. Employment numbers inch closer, but until they do, the market looks reluctant to push or pull too severely in either direction. The Dow was +0.09% today, the S&P 500 -0.16%, the Nasdaq -0.30% and the small-cap Russell 2000 -0.19%.
One thing we saw today is the apparent end of the bond-yield inversion after two-plus years: the 10-year rate is currently at +3.766% and the 2-year is now +3.763% — the first time since July 2022 that short rates are lower than long rates. (Yield-curve inversions are historically red flags for economic recession, though we’ve managed to avoid one of those since the first two quarters of 2020.)
These bond yields do jump around a bit over time, but it’s a solid bet that even if we see slight inversions over the next couple weeks, a cut to the Fed funds rate (on September 18th) — especially one of 50 basis points (bps) instead of 25 bps — will put an end to this cycle. And hopefully fears of a recession with it.
JOLTS Falls Sharply in July
The Job Openings and Labor Turnover Survey (JOLTS) for July came in at 7.67 million job openings, well below the 8.1 million expected and beneath the downwardly revised 7.91 million for the previous month. This is the smallest tally we’ve seen since January 2021, and -28.7% lower than the March 2022 highs of 12.2 million job openings.
A total of 5.5 million hires in the month was slightly up month over month. The hiring rate ticked up 20 bps in July to +3.5%, while Job Quits bumped back up to +2.1% from a downwardly revised +2.0% for June. Healthcare and Social Assistance shed the most job openings, -187K, offset largely by +178K growth in Professional/Business Services.
In short, the labor market continues to tighten. These numbers do not appear to beg for a 50 bps rate cut at the September 18 Fed meeting, but depleted numbers from private-sector payrolls in the ADP (ADP - Free Report) report tomorrow and the Employment Situation figures from the U.S. government Friday morning may help get this ball rolling.
Beige Book Shows More Declining Regions
The Fed has also put out a new Beige Book for August this afternoon. Think of this as sort of a report card for the 12 cities that have a Federal Reserve office. The number of cities with flat or declining economic conditions fell to nine from five the previous report.
Only Boston, Chicago and Dallas posted economic gains among the 12-city survey last month. In the prior Beige Book, only Minneapolis posted negative growth, but this time around it was Philadelphia, Cleveland, Richmond (VA) and Atlanta were among those regions slightly losing ground. Consider this more grist for the 50 bps-cut mill.
Quarterly Earnings Roundup: HPE, AI
Hewlett-Packard Enterprises (HPE - Free Report) notched its ninth-straight positive earnings surprise, as its fiscal Q3 numbers were reported after the close today. Earnings of 50 cents per share outpaced the 46 cents in the Zacks consensus (and a penny ahead of the year-ago quarter), while revenues of $7.71 billion were nicely ahead of the $7.64 billion expected. Yet slight misses on overall Gross Margin and Intelligent Cloud have helped nudge a sell-off of -2.7% in late trading on the news.
C3.ai (AI - Free Report) , the enterprise services supplier with the good sense to choose the ticker symbol “AI,” is trading down -16% in today’s after-market, even after the company beat on its bottom line for fiscal Q1: -$0.05 per share versus -$0.13 expected. It’s now the 12th-straight earnings beat for the company, while the $87 million in quarterly sales was slightly below the $87.12 million anticipated. It’s subscriber rate also came in notably below estimates. Shares had already been down nearly -20% year to date.
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