Back in Business: Dockworkers on Clock, Jobs Report Looms, IDF Attacks
The big question today: What will the Bureau of Labor Statistics come up with now?
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First, the good news....
Three days. That's all it was. It seemed like much more. The roughly 47,000 U.S. dockworkers along the Atlantic and Gulf coasts represented by the International Longshoremen's Association ended their strike at least for now and went back to work. The work stoppage will officially be suspended until Jan. 15, after the election and after the holiday season allowing the two sides more time to hammer out the details of a new contract.
The ILA and the United States Maritime Alliance reached a tentative agreement after the port operators offered labor a 62% wage increase over six years, up from their prior offer of a 50% raise. The union has asked for a 77% raise. The two organizations released a joint statement that read: "Effective immediately, all current job actions will cease, and all work covered by the Master Contract will resume."
The use of automation that could ultimately replace at least some human workers on the docks, which the union was looking for new language on that would protect their membership, has been a sticking point. We haven't seen a lot of (or any) news regarding any outcome in regard to that dispute overnight. This is likely why the strike has only been suspended and not ended and will likely be a point of contention once again, come mid-January.
Israel Expands Targets, Biden Triggers Oil Uncertainty
Now, the not-so-great news....
The Israeli military continued to strike targets near the airport in Beirut, Lebanon overnight that were aimed at diminishing the terrorist group Hezbollah's leadership, supplies, and facilities. The IDF has stepped up its campaign against Hezbollah over the past month, which has included strikes against the Iranian proxy's leaders and putting boots on the ground inside Lebanese territory.
Earlier this week, Iran fired as many as 200 ballistic missiles at Israel in response to Israel's war on Iranian funded terrorist groups Hamas and Hezbollah and the killing of an Iranian general in Lebanon. This large-scale attack, like the one launched by Iran and its proxies last April, caused very little damage, as nearly everything the Iranian military has thrown at Israel has been intercepted with some help from the U.S. Navy.
Israel's Prime Minister Benjamin Netanyahu has said that Israel will have to retaliate to Iran's attack and is under some pressure at home to respond in a more aggressive way than Israel did last April. U.S. President Joe Biden caused a stir in financial markets on Thursday and huge rally in markets for crude oil futures when he probably accidentally answered a reporter's question about whether the U.S. would support an Israeli attack on Iran's oil infrastructure with "we're discussing that. I think that would be a little - anyways."
It was seen as likely by the media and by keyword reading algorithms that trade financial markets that the U.S. president had caught himself saying too much and cut off his own words mid-statement.
Speaking of Oil ...
The president's halted remark and ongoing combat operations inside Lebanon did push energy prices higher on Thursday. Front-Month (November) WTI crude futures gained 5.1% to $73.71 per barrel for the day. This morning, I saw WTI trading around $74.45, up an additional 1% or so. Front-month (December) Brent crude was up 5% on Thursday and is up almost another 1% this morning, trading around $78.40. Front-month Natural Gas was also up 2.9% on Thursday but is flat so fat on Friday morning.
A major airstrike against Iran's export capacity could take as much as 1.5 million barrels of oil supply out of the market, according to estimates published by Citigroup. According to the EIA (Energy Information Administration), Iran produced an average of 3.3 million barrels of oil per day in the second quarter of 2024. Half of that is believed to be exported.
Marketplace: Treasuries Under Pressure
U.S. Treasuries were under pressure again on Thursday as the U.S. Dollar Index continued to strengthen. The U.S. Ten Year Note paid 3.85% by day's end on Thursday, up six basis points from the day prior. The yield for the U.S. Two Year Note was also up six basis points on Thursday to 3.71%. Both of those products have surrendered another basis point or so, overnight.
Equities traded in confused fashion on Thursday. Trading volume was lighter than it has been due to the Jewish New Year, but not as low as it has been in the past. One must remember that algorithms have replaced humans for the most part and now account for close to 100% of all trading. Algorithms do not observe holidays.
While the Nasdaq Composite closed very close to flat at -0.04%, one must remember that the Nasdaq is home to a lot of high-tech and home to a lot of small caps. While the Philadelphia Semiconductor Index gained 0.51%, the Russell 2000 gave up 0.68%. The S&P 500 was down small at -0.17%, weighed down by the Dow Transports that were walloped for a loss of 1.42%. We'll see if the end of the strike puts the transports in a better mood on Friday.
Breadth Goes Bananas
Think equity index performance was a little screwy on Thursday? Check out this bag of bananas: Nine of the 11 S&P sector SPDR exchange-traded funds closed in the red, led lower by the Discretionaries XLY, Staples XLP and Materials XLB. All three of those funds gave up at least 1% for the day. Energy XLE, of course, was the runaway winner on Thursday, up 1.76%, with Tech XLK the only other sector that ended the day in the green.
Now, this will be interesting, Losers beat winners by a rough 2-to-1 margin at both of New York's exchanges. For NYSE-listed securities, advancing volume took a 35.9% share and composite volume was moderately lower. That's easy to understand. However, for Nasdaq-listed securities, advancing volume took a 56.3% share despite the losers having a two to one advantage?
How's that? Simple. Big Tech, which was up, trades on far heavier volume than do the small caps, that vastly outnumber big tech. Composite trading volume was moderately lower for Nasdaq-listings as well.
The Macro: Jobs Day!
Today is September Jobs Day. No kidding. Some oddities may be lurking, however. Some theories, as well. On Thursday, the weekly initial jobless claims print landed at 225,000, up small from the week prior and barely moving the four-week average. Continuing claims also barely moved. We keep hearing of this company or that company laying off hundreds or even thousands of workers. Why are they not showing up in the data?
Peter Boockvar, CIO of Bleakley Financial Group, pointed out a few things in his missives on Thursday. One, the companies that have been laying workers off have in many cases been large tech companies that provide generous severance packages. Boockvar suggests that perhaps this allows some individuals to afford to stay out of the labor force for a while.
The other point Boockvar makes is that the gig economy, which is very real, in many cases, while requiring a great deal of hustle, pays better than state level unemployment benefits. Some folk may choose to work a gig job or two or three, while looking for their next position. That I can attest to. That's exactly what I did when my entire department was eliminated during the Great Financial Crisis.
Gigs back then just were not that heavily tied to Uber UBER and Lyft LYFT, they were more along the lines of part time construction and overnight shelf stocking. The experience taught me to never, ever rely on someone else for a paycheck. Being self-employed and self-reliant is the best career-minded thing that ever happened to me. My career never could have rebounded as it did if I had kept working for others.
Word on Wall Street...
A lot of folks on Wall Street are talking about a potential upside surprise for this morning's Non-Farm Payrolls (job creation) print for September. Two things stick out at me before I can get comfortable with that idea. Those two things are the September ISM Manufacturing and Non-Manufacturing surveys (PMIs). U.S. Manufacturing was awful in September. Same as it ever was. U.S. Services were kind of strong in September. Same as it ever was.
One thing was different, though. The employment components in both surveys showed contraction from August. For manufacturing, contracting employment is the norm. May was the only month in 2024 that the manufacturing sector saw positive job creation. There have only been three such months since the start of 2023. However, on the services side, sticking out like a sore thumb in an otherwise strong report, was a contraction in employment from August. That was after two straight months of job growth in the service sector.
The truth is that according to the Institute of Supply Management, the service sector has only shown job growth for three months in total for 2024, while jobs have contracted for six months. Who knows really? About all we do know about the Bureau of Labor Statistics is that whatever it releases this morning will be taken as scripture by the financial media if positive and the agency's long run of inaccurate estimates will be front and center if the number is weak.
Anyone Else Notice: Palantir Rocks
That long-time Sarge-fave Palantir Technologies PLTR ran 4.7% on Thursday to close at $39.24. That's right, the stock closed at its highest level ever, after we published a piece here putting a $48 target price on those shares.
Rock and roll, hoochie koo
Lordy mama, light my fuse
Rock and roll, hoochie koo
Truck on out and spread the news
Yeah, did somebody say keep on rockin?
That's right
Woo!
- Rick Derringer, 1973
September Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 145K, Last 142K.
Unemployment Rate: Expecting 4.2%, Last 4.2%.
Underemployment Rate: Expecting 8.0%, Last 7.9%.
Participation Rate: Expecting 62.8%, Last 62.7%.
Average Hourly Earnings: Expecting 3.3% y/y, Last 3.8% y/y.
Average Weekly Hours: Expecting 34.3, last 34.3 hours.
Other Economics (All Times Eastern)
1:00 p.m. - Baker Hughes Total Rig Count (Weekly): Last 587.
1:00 p.m. - Baker Hughes Oil Rig Count (Weekly): Last 484.
The Fed (All Times Eastern)
09:00 - Speaker: New York Fed Pres. John Williams.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: APOG (1.23)
At the time of publication, Guilfoyle was long PLTR equity.
