Markets

Daily Markets: What Will the U.S. Jobs Report Mean for the Fed’s Taper Timing?

Federal Reserve - Shutterstock photo
Credit: Shutterstock photo

Today’s Big Picture

Asia ended their day generally up with the exception of South Korea’s KOSPI index and Taiwan’s TAIEX, which traded down 0.11% and 0.44%, respectively. After the end of Golden Week, China’s Shanghai Composite posted a 0.67% gain for the day and we saw the Hang Seng gain 0.55% the Nikkei up 1.34%, and India’s SENSEX rise 0.64% to end the week on a positive note.

Midday trading in Europe sees those markets mixed with Germany and France slightly off and the U.K. having a strong showing and Italy in positive territory. Unsurprisingly, Irish markets are trading off on news that they are aligning their corporate tax structures with the rest of the EU.

While the Senate passed a deal on a short-term debt ceiling increase that now moves to the House for a vote on October 12, the main thrust of today’s market action will be the September Employment Report and what it may mean for the Fed’s taper timing. On the back of the blowout September ADP Employment Change Report, the consensus forecast for the number of non-farm jobs created during September rebounded to around 479K, which compares to the 235K created in August. While the market mood has improved in recent days, we’d note that the correlation between the ADP Employment Report and the monthly Employment Report is far from stellar. Our concern is that market watchers could be disappointed if the September Employment report underwhelms. We’d also remind readers that, based on its sources, Bloomberg News reported if the actual number for September jobs comes in at 240K or lower, any taper announcement in November will be off the table. 

Data Download

International Economy

The Caixin China General Services PMI jumped to 53.4 in September vs. the 50.7 consensus forecast and 46.7 in the prior month, moving away from the lowest level seen since the height of the pandemic in 2020. New orders and employment bounced back to the expansionary territory, as a major COVID-19 outbreak in the eastern province of Jiangsu eased. Input prices rose for the 15th straight month and increased at a faster pace on rising labor, freight and raw material costs. Meantime, prices charged went up after falling in August.

The Economy Watchers Survey Current in Japan rose to 42.1 in September from 34.7 in August, while the Outlook component climbed to 56.6 in September from 43.7 the prior month. German Imports during August strengthened during the month, rising +3.5% from July’s -3.6% and the expected gain of +1.8%. The region’s August Exports of -1.2% missed the +0.5% consensus and were down compared to +0.6% in July.  

Ireland has finally come around to a global minimum tax plan that G7 and G20 nations hope will combat tax evasion and standardize rules across the world. The country will give up its treasured 12.5% corporate tax rate by joining a group of 140 nations that have agreed to an effective levy of 15% on major multinationals.

Domestic Economy

Last night, the Senate passed a bill that allows the debt ceiling to increase by $480 billion to $28.8 trillion. The $480 billion figure is an estimate by the Treasury Department that should allow it to pay bills until December 3. The bill now moves to the House, where Speaker Nancy Pelosi (D-California) is expected to take up the legislation within the coming days. According to reports, House Majority Leader Steny Hoyer (D-Maryland) said lawmakers would be called back from recess for an October 12 vote. 

Before the market open, investors will receive the eagerly awaited September Employment Report and size it up against the consensus forecast that calls for 479,000 (NonFarm Payroll) jobs to have been created during the month vs. 235K in August. The pace of job creation will be closely watched to determine the Fed’s timing on tapering its bond-buying activity. Later this afternoon, August Wholesale Inventory data will be published as will the weekly Baker Hughes Oil Rig Count data. Given the recent climb in oil prices, odds are investors will be looking for the recent upswing in active rigs to continue. 

Markets

The S&P 500 rose 0.8% yesterday following an agreement among Senate leaders that would raise the debt ceiling by $480 billion and give the Treasury enough funds through December 3. From a technical perspective, the S&P 500 exhibited some resistance as it approached its 50-day moving average at 4,439. Ten of the 11 S&P 500 sectors closed higher on the day led by consumer discretionary, materials and healthcare. The Dow Jones Industrial Average closed yesterday 1.0% higher, a tad behind the 1.1% increase for the Nasdaq Composite. Leading the day, however, was the Russell 2000 that gained 1.6%.

Crude oil prices recovered some of their recent losses after the U.S. Department of Energy reportedly said it has no plans to release crude from its Strategic Petroleum Reserve. 

Stocks to Watch

Earnings Announcements & Guidance

Non-lethal self-defense products maker Byrna Technologies (BYRN) is the only name slated to report earnings today pre-market. Investors will be on watch for any earnings pre-announcements, good or bad.

Specialty truck company Oshkosh (OSK) issued downside guidance for its September quarter with EPS in the range of $0.90-0.95 vs. the $1.79 consensus. Per the company, while it is seeing strong demand, it is experiencing significant supply chain and logistics disruptions as well as material and freight cost inflation that are beyond the company's prior expectations. 

Ford Motor (F) will temporarily suspend production from October 11 to 12 at its Hermosillo plant in Mexico because of material shortages.

Match’s (MTCH) Tinder dating app and ride-hailing company Lyft (LYFT) are partnering on a new feature that lets Tinder members buy a Lyft ride for a potential date.

Tesla (TSLA) CEO Elon Musk said during its annual meeting last night that he will move Tesla headquarters from Palo Alto, California to Austin, Texas.

Semiconductor foundry Taiwan Semiconductor (TSM) reported its September revenue rose 19.7% YoY +11.1% (MoM) to ~TWD$152.69 billion. Alongside those figures, the company issued upside guidance for the September quarter with revenue of ~TWD$414.7 billion vs. the TWD$413.46 billion consensus.

Oracle (ORCL)Telecom Italia (TIIAY) and Noovle, TIM Group's cloud company, signed a collaboration agreement to offer multi-cloud services for enterprises and the public sector organizations in Italy.

Samsung (SSNLF) shared its quarterly profit for the September quarter was 15.8 trillion Korean won (~$13.26 billion), up 28% YoY and its best quarterly profit since 3Q 2018, but below the 16.1 trillion Korean won consensus forecast. 

IPOs

NordicTrack parent iFIT Health & Fitness (IFIT) postponed its IPO last night  citing unspecified “adverse market conditions.”

M&A Activity

Cigna Corporation (CI) announced a definitive agreement with Chubb (CB) to sell its life, accident, and supplemental benefits businesses in seven countries for $5.75 billion.

After Today’s Market Close

No companies are slated to report their quarterly results. Those looking to get a jump on the earnings reports to be had in the coming days should visit Nasdaq’s earnings calendar page

On the Horizon

  • October 12: JOLTs report
  • October 13: CPI, FOMC Minutes
  • October 14: Weekly jobless claims, PPI, Monthly budget statement
  • October 15: Retail Sales, Import & Export Prices, NY Empire State Manufacturing, Michigan Consumer Sentiment (preliminary), Business Inventories

Thought for the Day

“Life is ten percent what happens to you and ninety percent how you respond to it.” ~Louis Holtz

Disclosures

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Chris Versace

Christopher (Chris) Versace is the Chief Investment Officer and thematic strategist at Tematica Research. The proprietary thematic investing framework that he’s developed over the last decade leverages changing economic, demographic, psychographic and technology landscapes to identify pronounced, multi-year structural changes. This framework sits at the heart of Tematica’s investment themes and indices and builds on his more than 25 years analyzing industries, companies and their business models as well as financial statements. Versace is the co-author of “Cocktail Investing: Distilling Everyday Noise into Clear Investing Signals” and hosts the Thematic Signals podcast. He is also an Assistant Professor at NJCU School of Business, where he developed the NJCU New Jersey 50 Index.

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Lenore Elle Hawkins

Lenore Elle Hawkins serves as the Chief Macro Strategist for Tematica Research. With over 20 years of experience in finance, her focus is on macroeconomic influences that create investing headwinds or tailwinds. Lenore co-authored the book Cocktail Investing and in addition to her Tematica work, provides M&A consulting services for companies in Europe looking to expand globally. She holds a degree in Mathematics and Economics from Claremont McKenna College, an MBA in Finance from the Anderson School at UCLA and is a member of the Mont Pelerin Society.

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Mark Abssy

Mark Abssy is Head of Indexing at Tematica Research focused on index and Exchange Traded Product development. He has product development and management experience with Indexes, ETFs, ETNs, Mutual Funds and listed derivatives. In his 25 year career he has held product development and management positions at NYSE|ICE, ISE ETF Ventures, Morgan Stanley, Fidelity Investments and Loomis Sayles. He received a BSBA from Northeastern University with a focus in Finance and International Business.

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