Big Friday: Jobs and My Trade Updates
We made it all the way to Friday, and now the long-awaited Bureau of Labor Statistics numbers land. Also, a look at the market, Fed, and some Sarge trading favorites: Palantir, SoFi and more.
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It's Friday, or as they say in some parts, Fri-Yay. This is not just any Friday, though. This morning, the Bureau of Labor Statistics, which is part of the Department of Labor, will release the results of the agency's two employment surveys for November. The headline print, at least according to the financial media, and thus by extension, the high-speed, keyword reading algorithms that control what passes in the modern era for price discovery, is the non-farm payrolls print for job creation. That allows this number, which is pulled from the establishment survey, as opposed to the household survey, to punch well above its weight class.
Why would a number that supposedly represents job creation not be the most important takeaway from the monthly data. Why shouldn't this number be afforded extra importance by traders and investors attempting to front-run monetary policy? Two reasons. The Non-Farm Payroll number is but one of three estimates we, as consumers of macroeconomic data, are "gifted" every month that supposedly reflects job creation and two... that non-farm payroll print is usually incorrect, sometimes wildly so, and revised (often lower) over the two months that follow.
The first of those three estimates is the ADP Employment Report measuring private sector hiring, which is released every month on the Wednesday morning ahead of the Friday BLS report. The second is pulled from the BLS Household Survey and is simply the number of Employed persons. The media usually avoids reporting this number as it has often been significantly less optimistic than has been the NFP print.
As for the ADP print for November, that number disappointed earlier this week. The ADP Employment Report for November hit the tape at 146,000 private sector jobs created, well below expectations that had been for something close to 165,000. Additionally, October private sector job creation was revised down from 233,000 to 184,000, leaving the November print up just a net 97,000 jobs.
Readers will recall that the BLS Establishment Survey reported just 12,000 non-farm payroll jobs created in October. That low number could be revised higher for a change as well as set up a rebound of some size for November. We shall see. Readers will see that my estimate below is for a 183,000 print. This release, along with the November print for the consumer price index, which is due this coming Wednesday are the key numbers being watched ahead of the Fed's Dec. 18 policy decision.
Thursday's Numbers
The Department of Labor posted weekly initial jobless claims of 224,000 on Thursday morning, up from 215,000 the week prior. This was slightly above the consensus view, but there was some good news. Continuing jobless claims, which run a week behind initial claims, dropped down to 1.871 million from 1.896 million last week. This is now two successive weeks of declining continuing claims, though the number of individuals still receiving state level unemployment benefits remains close to three-year highs.
The data released by Challenger on Thursday morning was more negative looking. Announced job cuts (layoffs) for November, increased 3.8% from October to 57,727 and stands up 27% year over year. Peter Boockvar in his daily musings pointed out that within the Challenger data, announced hiring plans for 2024 were now at their lowest level year to date since 2015.
FOMC Probability
According to Fed Funds Futures trading in Chicago, ahead of the BLS prints on Friday morning, there is a 68% probability for a quarter-percentage point rate cut on Dec. 18 with a 53% likelihood for a next quarter point cut to be made in March. These markets only see the Fed Funds rate at a range of 3.75 to 4% by year's end 2025, down from a target range of 4.5% to 4.75% today.
As far as consumer-level inflation is concerned, the Cleveland Fed currently sees November consumer price index print at year-over-year growth of 2.7%, with December at 2.82%. This would reflect renewed acceleration in headline inflation from 2.6% in October and 2.4% in September. The Hedgeye model, which has been very accurate and is something that I pay for, shows inflation accelerating more aggressively than does the Cleveland Fed's model for both November and December. I won't give away their numbers out of respect for their business.
Marketplace
Domestic financial markets appeared to be cruising on Thursday until news broke that a serious earthquake had hit Northern California, and a tsunami warning had been issued for the Pacific coast of North America. That warning passed without incident, but the markets did not recover as traders took profits ahead of this morning's jobs numbers.
Treasury yields closed out the session slightly higher on the day as the U.S. dollar showed some weakness. Bitcoin, which had traded as above $103,600 per token on Thursday, sold off sharply later in the day, bottoming below $94,000 overnight before rallying yet again. I currently see Bitcoin trading just below $98,000 per token.
U.S. equities were slapped around on Thursday. Both the S&P 500 and the Nasdaq Composite closed lower for the day (-0.19% and -0.17% respectively) ending their winning streaks and their streaks of record high closing levels. Those numbers seem not so severe, but there was more serious damage across the mid-major equity indexes. The Philadelphia Semiconductors gave back 1.86%, as the Dow Transports backed up 1.11%. The small to mid-cap indexes lost from 0.84% to 1.45% on the day.
Five of the 11 S&P sector-select SPDR exchange-traded funds closed in the green on Thursday, led by the Discretionaries XLY. That group was up just 0.82%, as no sector showed gains of 1% or more. Three of the six sector funds that shaded into the red on Thursday, lost at least that much. The Materials XLB, Industrials XLI, and Health Care XLV all lost at least 1% on the session.
Losers beat winners by a rough 3-to-2 margin at the NYSE and by a little less than 2 to 1 at the Nasdaq on Thursday. Advancing volume took a 47.7% share of composite NYSE-listed trade and a 49.9% share of composite Nasdaq-listed activity. Was the "down" day meaningful? Ahead of the jobs numbers? Probably not so much. Aggregate trading volume across NYSE-listed securities was up 5.2% day over day, but aggregate trade across Nasdaq-listings was down 8.1% from Wednesday's total. To me, that's a "meh."
Trading: Palantir, RocketLab, SoFi ...
On Thursday, I added to existing long positions in both SentinelOne S and Intel INTC on weakness. I also initiated a long position in Honeywell HON, also on weakness as that name continues to surrender ground after soaring almost a month ago after news broke that activist investor Elliott Management had taken more than a $5B stake in the name. I had missed that move and had to bide some time to get in.
Palantir Technologies PLTR and RocketLab USA RKLB both had nice days on Thursday, and both are trading higher overnight. I have taken profits in neither as these are long-term investments that I feel have not yet reached their potential. In fact, I did add to my long position in RKLB on weakness earlier this week.
SoFi Technologies SOFI looks like it has started to enter into a potential basing period of consolidation. I have been asked by readers about where to add or re-enter. My feeling right now is that I am waiting for either the stock to drop down to its 50-day simple moving average or its 50-day simple moving average to catch up to the stock.
Sarge quantum computing names D-Wave Quantum (QBTS) and Quantum Computing Inc QUBT were both hot on Thursday and have remained so overnight. Though we are up a quick 20%+ in QBTS, we are nowhere near thinking about taking profits. These positions are in the build-up phase and are being bought when weak and held for now on strength.
November Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 183K, Last 12K.
Unemployment Rate: Expecting 4.2%, Last 4.1%.
Underemployment Rate: Last 7.7%.
Participation Rate: Expecting 62.6%, Last 62.6%.
Average Hourly Earnings: Expecting 4.0% y/y, Last 4.0% y/y.
Average Weekly Hours: Expecting 34.3, last 34.3 hours.
Other Economics (All Times Eastern)
10:00 - U of M Consumer Sentiment (Dec-adv): Expecting 73.0, Last 71.8.
10:00 - U of M One-Year Inflation Expectations (Dec-adv): Expecting 2.9%, Last 2.6%.
10:00 - U of M Five-Year Inflation Expectations (Dec-adv): Expecting 3.2%, Last 3.2%.
13:00 - Baker Hughes Total Rig Count (Weekly): Last 582.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 477.
15:00 - Consumer Credit (Oct): Last $6B.
The Fed (All Times Eastern)
09:15 - Speaker: Reserve Board Gov. Michelle Bowman.
10:30 - Speaker: Chicago Fed Pres. Austan Goolsbee.
12:00 - Speaker: Cleveland Fed Pres. Beth Hammack.
13:00 - Speaker: San Francisco Fed Pres. Mary Daly.
Today's Earnings Highlights (Consensus EPS Expectations)
Before the Open: GCO (.22)
At the time of publication, Guilfoyle was long S, INTC. HON. PLTR, RKLB, SOFI, QBTS, QUTB equity.
