INTRADAY ALERT: Stocks down on "good enough" jobs report. Seems like market is "front loading" the seasonal weakness into election day.

INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.
INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.
INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.

The August jobs report came in at +142k (vs Street +165k) and the unemployment rate fell to 4.2% from 4.3% last month (inline). To us, this is an ideal right “in the middle” jobs report, showing jobs improving versus last month, but neither too strong or weak to drive a shift in the economic view. Disappointingly, equities are under pressure on the heels of this report.

  • Stocks have fallen since the first day of this month and the sell-off today brings losses to -4% for the week. This is one of the 5 worst ever starts for September since 1928. And a surprisingly poor start given the paucity of fundamental reasons for this.
  • Is there a fundamental justification for stocks to be this week? In our view, no.
    – The Aug jobs report is good enough
    – The % of industries adding jobs rose to 53%, best since May
    – The Aug CPI report is next week and should be confirming inflation falling
    – Fed set to cut on Sept 18th
  • But this has not stopped the selling. And we have a few ideas why:
    – first, the Yen is rallying and this is pressuring stocks
    – Yen rally impacts global liquidity, in theory, as carry trades unwind
    – second, odds of 50bp cut in Sept actually fell to 27%
    – initially rose to 65%, but since turned down
  • There is fear building as Mark Newton points out. The equity put/call ratio is set to close at the highest level in a year. The last time it was near these levels is the August 2024 lows.

Bottom line: Even if we are cautious about next 8 weeks, to us, stocks are at the lower end of the range and we see more upside than downside

We would not be sellers here. We expected stocks to rebound on today’s report. And while we are disappointed this did not happen, this does not mean this cannot start next week. I just don’t see the fundamentals justifying a -4% decline in the first week of Sept.

  • That said, it is starting to look like we are “front loading” this seasonal weakness.
  • Watch the VIX, as this getting back to 15-ish is a sign that things are turning
  • I don’t see the reason for investors to be this bearish, even as we note the need to be cautious

INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.

INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.

INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.

INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.

INTRADAY ALERT: Stocks down on good enough jobs report.  Seems like market is front loading the seasonal weakness into election day.

_____________________________

42 SMID Granny Shot Ideas: We performed our quarterly rebalance on 7/16. Full stock list here -> Click here

______________________________

PS: if you are enjoying our service and its evidence-based approach, please leave us a positive 5-star review on Google reviews —> Click here.

___________________________

More from the author

Disclosures (show)

Sign in to read the report!

We have detected you are an active member!

Ray: 30f886-168573-4a39f2-b1ca6b-006cca

Want to receive Regular Market Updates to your Inbox?

I am your default error :)

Events

Trending tickers in our research