Friday, September 4, 2015

Keystone's Morning Wake-Up 9/4/15; Monthly Jobs Report

The Monthly Jobs Report is imminent (8:30 AM EST; 1:30 PM London; 2:30 PM Frankfurt and Paris; 8:30 PM Shanghai; 9:30 PM Tokyo) and is the most important information for the ‘data-dependent’ Federal Reserve ahead of the rate decision on 9/17/15. The consensus is for 223K jobs and an unemployment rate to dip slightly to 5.2%. The extremely important average hourly earnings are expected to remain flat at +0.2%. The average workweek is expected to remain unchanged at 34.6 hours.

Credit Suisse and Deutsche Bank analysts say August job reports in the States consistently miss expectations. CS expects 180K jobs and a 5.2% unemployment rate. DB expects 170K jobs and a 5.2% rate. BCS is more optimistic expecting 225K jobs with a 5.2% rate.

Traders and analysts are focused on wages since inflation cannot exist without wage inflation (the Fed is trying to create inflation for over six years with their obscene Keynesian money printing). It is very unlikely the Federal Reserve will move with the first rate hike on 9/17/15, only 13 days away, if wages are flat to lower.

If the jobs number is robust and wages increase nicely, the Fed will be more likely to announce a rate hike in 13 days. Treasury yields will move higher. If the jobs number is weak under 200K and there is no wage growth, the Federal Reserve is unlikely to announce the first rate hike on 9/17/15. The stock market direction is tricky. If a rate hike is coming, stocks may retreat with traders thinking the easy  money party is ending. If the data is weak and a rate hike appears unlikely, that means more easy money into the end of the year, so stocks should rally.

Note Added 7:30 AM: S&P futures -19. Dow -170. Nasdq -43. Euro 1.1138. Treasury yields are; 2-year 0.68%, 5-year 1.46%, 10-year 2.13%, 30-year 2.91%.

Note Added 9:08 AM:
Minutes before the jobs report, S&P -16. Dow -146. Nasdaq -35. DAX -2%. CAC -2.1%. FTSE -1.6%. Euro 1.1139. USD 96.24. Euro/yen 132.79. Dollar/yen 119.21. Pound 1.5231. Mexican Peso 16.8559. Canadian Dollar 1.3239. Aussie dollar 0.6984.

WTIC oil 46.51. Brent oil 50.46. Natty gas is down -1.7% to 2.68. Gold 1122. Silver 14.62. Copper -1.6% to 2.346.

US Treasury yields are; 2-year 0.68%, 5-year 1.45%, 10-year 2.12%, 30-year 2.90%. German bund 0.681%. Japan 10-year yield 0.368%.

At 8:30 AM EST, the Monthly Jobs Report is 173K jobs with an unemployment rate at 5.1%. The unemployment rate is the lowest since March 2008. June and July revisions are up 44K jobs. Average hourly wages are up +0.3% showing a slight improvement in wages over last month’s +0.2%. The average hours worked is 34.6 hours.

The labor force participation rate is 62.6% sticky at the same level for the last three months and at the lowest rate since the 1970’s. Lots of folks remain out of work unable to find a job. The U-6 unemployment rate improves slightly to 10.3% the lowest since June 2008. Jobs are averaging 221K over the last three months which is a good enough number to prompt the Fed to announce a rate hike.

The headline 173K number is disappointing barely enough to cover the new entries into the job market this month, however, analysts are quick to point out that August future revisions average 30K jobs higher or more so the headline number may be revised to 200K-plus next month or the month after. The unemployment rate at 5.1% is better than expected which will encourage the Fed to raise rates. The wages are better than expected at +0.3% also a feather in the cap for raising rates on 9/17/15. Traders and analysts are looking past the 173K jobs number and instead keying in on the other data viewing the jobs report as a good report despite the weak headline number.

US futures react violently dropping then recovering to better numbers than before the data then rolling over to the downside. Treasury yields are up slightly so traders are viewing the jobs report as a good report and encouraging for a rate hike announcement by the Fed in 13 days. Yields are up and stock futures down so the report is viewed as favorable (the Fed may hike rates sooner rather than later so the easy money party ends sooner rather than later so stocks leak lower).

At 8:37 AM, S&P -23. Dow -210. Nasdaq -48. 2-year yield 0.705%. 10-year yield 2.13%.

At 8:45 AM, S&P -20. Dow -182. Nasdaq -43.

At 8:49 AM, S&P -22. Dow -200. Nasdaq -46. DAX -2.3%. CAC -2.2%. FTSE -1.8%.

Treasury yields are; 2-year 0.72%, 5-year 1.49%, 10-year 2.16%, 30-year 2.92%. German bund 0.688%.

At 8:51 AM, S&P -27. Dow -240. Nasdaq -57.

At 8:54 AM, S&P -32. Dow -275. Nasdaq -67. DAX -2.7%. CAC -3%. FTSE -2%. Euro 1.1138. Dollar/yen 118.84. Pound 1.5215.

Oil is sticky at the whole number levels. WTIC oil 46.00. Brent oil 50.00. Natty 2.68. Gold 1124. Silver 14.64. Copper is down -2.7% to 2.3195.

Treasury yields are; 2-year 0.71%, 5-year 1.47%, 10-year 2.13%, 30-year 2.90%. German bund 0.688%. Treasury yields are whipping all over the place. Each time you look at the screen it is different. The 10-year yield pops to 2.15%, now 2.14%. Time is needed for markets to settle. The tape is very jumpy after the jobs report.

At 9 AM, S&P -29. Dow -255. Nasdaq -59. Gold 1122. USD 96.40. Euro 1.1125. (note the higher dollar move and lower euro). Dollar/yen is 118.97 running back up to 119. Pound 1.5195 under 1.52. CAT drops -2% on a downgrade. JOY is down -2% receiving multiple downgrades after reporting weak earnings this week. When less construction and mining machinery is needed around the world, a global economic slowdown is in progress.

US futures are falling apart. S&P -35. Dow -296. Nasdaq -72.

(As always, the daily machinations of the stock market are chronicled and explained by Keystone the Scribe. The monthly publication of the Daily Chronology of Global Markets and World Economics is the only detailed and concise document available on the internet or in print  that describes the historic stock market topping behavior this year and roll over to the downside. The publication for August, 2015-08 is available from Amazon via the link in the left margin.)

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