Friday Morning Rebel Brief — Jobs Report is Hot, Market is Not

“This is some recession we’re having isn’t it?” — A skeptical Steve Leisman on the back of jobs data that obliterated expectations.

Don’t ask the market how they feel about that non-recessionary data, though — the indices traded down on the news, led by the Nasdaq which fell more than 1.2% immediately on the data release. 

The market, which was worried about a potential recession looks to now be worried about the potential for the Fed to act more hawkish. Time will tell whether the market shifts its perspective on this objectively positive jobs report.

Monthly US Jobs Report Comes in Much Stronger Than Expected

US Nonfarm Payrolls numbers were released this morning, indicating that the employment environment is much stronger than previously expected. 

The official reported number was 372,000 — 38.8% higher than the forecast of 268K, against a previous Nonfarm Payroll number of 390K. Here are the rest of the numbers (which match this strong sentiment):

• Headline number: 372,000 vs expected 268,000.
• Private payrolls: 381,000 (above expectation)
• Manufacturing: 29,000 (above expectation)
• Unemployment rate remains at 3.6% for the fourth month in the row (above expectation)
• Earnings up three tenths (in-line with expectations)
• Year-over-year earnings, 5.1
• Last month earnings revision: 5.3
• Average hourly work week: 34.5 hours
• Workforce participation rate: 62.2 current compared to 62.3 last month and 63.4 pre-covid
• Underemployment rate: 6.7 — A new low post covid

Interest rates spiked on the news and the indices — which were trading flat ahead of the report — immediately fell, led by the Nasdaq which dropped by 1.2%. Why would rates rocket and stocks fall? Likely because strong-economic data that indicates a non-recessionary environment means the Fed has a longer runway to continue to press hawkish fiscal policy.

Steve Leisman said it best,

“The unemployment rate really tells you all you need to know about that score. This is some recession we’re having, isn’t it? 372,000 jobs in the middle of a recession that everybody has called? I just don’t see it. 

I went on vacation for a week and everybody was talking about a recession in 2023, I came back and everybody was talking about a recession now. We had jobless claims be very low, good job growth in the economy, good job growth in leisure and hospitality which is still coming back from the pandemic. 

I’m not saying the economy doesn’t have challenges, I just have a hard time calling a recession with a 3.6% unemployment rate, 372,000 jobs, and average job growth over the course of the year at 456,000 every month.”

Upstart Trades Down — Admits it Will Miss Earnings

AI lending platform Upstart (UPST) announced after hours on Thursday that it will miss earnings in the upcoming quarter from both a profit and a revenue perspective. Two months ago, during the company’s previous earnings report, it’s share price was cut in half after it gave weaker than expected guidance — though apparently not weak enough. Shares of Upstart are down more than 18% in the premarket.

Levi Strauss & Co Reports Strong Earnings

Levi Strauss, the most popular denim brand in the world, proved today that not all companies have to roll back their earnings forecast. LEVI’s adjusted earnings rose 26%, beating Wall Street estimates. Revenue rose by 15% to $1.47B, beating the $1.43B estimate. Profit margins remained steady at 58.2%. LEVI reaffirmed forward guidance in revenue and EPS, and boosted dividends by 20%. The denim stock is trading more than 4% higher in the premarket.

Bank of America: Market Still Very Fearful

According to Bank of America’s weekly inflow report, $62.2B flowed into cash, $2.4B flowed into bonds. In contrast, $4.6B flowed out of equities. US Treasuries saw their biggest inflow in 8 weeks, equities saw biggest outflow in 8 weeks. US Treasury volatility is currently above 150, only the 11th time in 35 years. 

Additionally, BOFA’s Bull & Bear Indicator remains at “Extremely Bearish”, a signal it has held for four consecutive weeks. 

GameStop Gives Back Some of Yesterday’s Gains

After a stellar Thursday rally on the back of a newly announced 4-for-1 stock split, shares of GameStop are giving back some gains this morning. The stock is down more than 5% on news that CFO Michael Recupero has been fired and an undisclosed amount of employees have been laid off as part of a company-wide “recovery plan”. Of course, let’s remember: It’s GameStop. The stock could end the day up — or down — 10% and it wouldn’t really be so out of the ordinary. 

Former Japanese Prime Minister Shinzo Abe Assassinated

Japan’s former Prime Minister Shinzo Abe was shot in the back during a campaign speech on Friday. Police arrested a male suspect at the scene armed with what appeared to be a modified sawed-off shotgun. Whilst being airlifted to a hospital, Abe’s heart stopped beating. Though doctors had worked for hours to save him, the damage was too critical. Shinzo Abe died at the age of 67.

For more quick takes on this morning’s market-moving news, check out 60 Seconds With Jon Najarian!

https://twitter.com/jonnajarian/status/1545391563710283776

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