The stocks fell Thursday as concerns over tensions in the Middle East kept investors nervous in front of the September payrolls reports. The DJIA fell 0.44%, the S&P 500 lost 0.17% and the Nasdaq dropped 0.04%. October is off to a rough start due to the conflict in the region. Crude oil futures rose more than 5% on the day, making weekly gains 8%.
S&P 500
sources: Bloomberg, CNBC
Closing snapshot
source: MarketWatch
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“That which isn’t good for the hive, isn’t good for the bee.” — Marcus Aurelius
Labor Data
Initial weekly jobless claims of 225,000 rose from an upwardly revised 219,000 the previous week. The figures were slightly above analysts expectations of 223,000. Continuing claims fell slightly at 1.826 million, though they remain elevated above 1.8 million for the 17th straight week. The prior week was revised down by 7,000 to 1.827 million.
According to Challenger, Christmas and Gray, U.S. employers cut 72,821 jobs in September, down 4% from August. That’s still up 53% from a year ago. In the third quarter, companies announced plans to cut 174,597 jobs in total, up 19% from the third quarter of 2023. The tech sector continues to be the biggest driver of layoffs with 11,430 in September and 116,858 year to date.
This morning’s September nonfarm payrolls report at 7:30 am CT will shed more light on the employment picture. Analysts expect a 3.8% annual rise in average hourly earnings for September, but a 0.3% monthly rise, down from 0.4% in August. If those number come in as expected, or better, it could make workers feel more confident spending money.
Job growth averaged 116,000 over the last three months, far below 2023 and early 2024. A poor September number may reinforce speculation the Fed could cut rates another 75 basis point before the end of the year, though fed funds futures currently favor the odds of only 50 basis points.
Finally, the Fed has been concerned that monthly payrolls data overcounts actual jobs created, an idea reinforced by the government subtracting 800,000 positions from a year’s worth of payrolls reported ended in March; meaning a weak figure for September could be treated more pessimistically than normal by policy makers.
sources: CNBC, Bloomberg, WSJ, Schwab
More support for China
A leading economist thinks China has room to ramp up fiscal support for the economy to the tune of $1.4 trillion in special debt, reflecting rising expectations in the country that Beijing will boost public spending as part of its blitz of recent stimulus measures. The sudden stock surge that those announcements have caused is also sucking money away from the rest of Asia in global portfolios.
sources: Bloomberg, WSJ, CNBC
Money, money, money
OpenAI’s long awaited funding round closed on Wednesday giving the company a $4 billion revolving credit line and bringing its total liquidity to over $10 billion. It closed its latest funding round at a valuation of $157 billion, which includes $6.6 billion raised from investors including Thrive Capital, Microsoft, Nvidia, and Softbank. Investors in this round included: JPMorgan Chase, Citi, Goldman Sachs, Morgan Stanley, Santander, Wells Fargo, SMBC, UBS and HSBC.
This access to liquidity means the firm has the ability to invest heavily in new initiatives and scale easily. In a blog post Thursday, the company said that it plans to use the money to invest in research and products, expand infrastructure, and attract talent. “It also reaffirms our partnership with an exceptional group of financial institutions, many of whom are also OpenAI customers.”
source: Bloomberg, CNBC, WSJ
FX update
The dollar is up against the yen and the pound, driven by shifting investor bets on the monetary policy paths in both countries. The yen slumped overnight after new Japanese Prime Minister Shigeru Ishiba said the economy isn’t ready for another interest-rate hike.
Meanwhile, the British pound is sliding following comments from Bank of England Governor Andrew Bailey on the possibility of a more aggressive cutting cycle, which has seen investors ramp up bets on reductions to come. Bailey’s remarks in an interview to the Guardian newspaper had a big impact on markets because for months the view had been that the UK would lag peers in easing policy. Investors have been piling into bullish bets on the pound to take advantage of that rate differential, with hedge fund wagers hovering near the highest since 2018, according to data from the CFTC.
sources: Bloomberg, CNBC, WSJ
Movers
Constellation Brands (STZ) rallied early in pre-markets trading after beating quarterly earnings estimates. The company did report a loss, though smaller than expected. Shares couldn’t hold onto their gains as it slipped throughout the session.
SPX – Chartists are watching the July high of 5,667 as potential support. The SPX’s Relative Strength Index (RSI), a measure of momentum turned lower this week.
Toyota – Nikkei reported the company would delay U.S. production of an all-electric three-row SUV by several months pushing production into 2026. Design changes were cited but it’s another example of sluggish EV sales growth impacting auto maker’s plans.
Nvidia (NVDA) gained on Thursday as investors applauded the news that the chip maker has invested in ChatGPT developer OpenAI. The Wall Street Journal reported that Nvidia put $100 million into this funding round.
sources: IBD, WSJ, Barrons, Schwab
Chart of the day
Levi Strauss (LEVI)
Levi Strauss dropped more than 10% in pre-open trading and was still down ~7% in the afternoon. The company reduced its revenue forecast and is considering selling its Dockers brand. Technical support comes in at 18.44, then 16.38. Resistance is at 20.33 and 22.62.
sources: ThinkOrSwim, Forbes
In other news:
The hardline demand by U.S. dockworkers for a 77% wage increase is shocking even to veteran negotiators of past port labor contracts.
Two mines in North Carolina that produce high-purity quartz, a key component of semiconductors, remain shut as operators evaluate damage from Hurricane Helene. The nearby town of Spruce Mine saw “insane” devastation, the executive director of a local economic development organization told CNN.
Fake mobile apps for stock trading and advanced math have tricked users worldwide out of cryptocurrency, according to research from cyber company Group-IB. The math app, called SBI-INT, had been available in mid-2023 at the Apple App Store and Google Play Store, then moved to phishing websites after it was rejected by the stores, Group-IB said. (Hacker News)
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