Blockbuster Jobs Report: Everything You Need to Know

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Published Date 11/2/2018

Before this morning’s October employment data the stock indexes continued climbing after increasing 265 yesterday. The DJIA at 8:00 am ET added +220 and the 10-yr was at 3.18%, up +4 bps from yesterday.

At 8:30 am October employment data was better than expected for job increases and following the ADP increases on Wednesday. The unemployment was rate as expected, at 3.7% and unchanged from September. Non-farm jobs were expected to have increased 190K as reported, but reportedly added +250K, private jobs were supposed to add 181K but increased to 246K, and manufacturing jobs, thought to be up +13K, increased to 32K. Average hourly earnings as expected were +0.2% better than 0.3% in September, but yr/yr added +3.1%, up from 2.8% in September. The labor participation rate increased to 62.9% from 62.7%, better than 62.8% forecast. Average hourly earnings are the lowest in the last three months, but the yr/yr dampens the m/m data.

The reaction to the report didn’t change the markets from where they were trading prior to the report.

The Sept US trade deficit at -$54.0B was about in line with estimates.

At 9:30 am the DJIA opened up +125, the NASDAQ dropped -18, and the S&P added +9. The 10-yr at 9:30 and stood at 3.17%, up +3 bps.

At 10:00 am Sept factory orders were up +0.7% against the 0.5% expected. Final durable goods orders added +0.7%, excluding transportation unchanged — not bad, but durables are disappointing.

Trade with China got a little boost with President Trump’s remarks that he and Xi had a “long and very good” conversation yesterday. The comment added to the rebound in stocks yesterday and so far is following through this morning’s improvements. Trump has ordered his cabinet to prepare a trade draft to present to Xi when the two meet at the G-20 meeting at the end of this month. The softening tone has driven global equity markets higher and yesterday saw a lot of dollar selling on the news. If a trade deal can be resolved, it isn’t likely to be an easy negotiation. China is not simply going to roll over and accept whatever Trump eventually proposes; a new trade pact isn’t likely before the end of the year and will necessitate a lot of discussion and agreement on both sides. Nevertheless, US and global markets lit up today.

Apple reported strong earnings yesterday afternoon, but its stock is under pressure this morning with the announcement it will no longer report sales for iPhones, iPads, and Macs in fiscal 2019. Sales are declining from those strong numbers over the past few years. Analysts generally don’t like it, claiming Apple doesn’t want to report declining sales as the company appears to be moving more toward a service company as consumers are not jumping to its new products. Maybe consumers have enough technology on their current phones and computers.

Nothing left today to trade unless a presidential tweet surfaces. Don’t see anything scheduled now before next Tuesday’s elections. Democrats are likely to gain the House, but the Senate appears to be remaining Republican. It’s not unusual that the mid-term elections swing control of the House, as it happens regularly over the years. Gridlock is coming next year.

Source: TBWS

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