Markets (and finance Twitter) were readying all week to one piece of data that came out from the labor department this morning at 8:30. Plenty of time and energy has been spent predicting what a hot or cold Sept nonfarm payrolls number would mean for risk assets and Fed Funds.
After all that hype?. The non number is just meh. And stocks, the yield on the 10 year U.S. Treasury, the U.S. dollar and crude oil are all unchanged.
Ironically, the most exciting thing that happened this week on was the Twitter take-over saga, with the stock ultimately losing $3 billion in market cap from its prior weeks gains. Twitter is a massive echo chamber for finance peeps like you and me. Sometimes that can be quite useful and a resource for market data you may not have discovered otherwise. Especially when that source is an expert in that sector. But let’s face it, most of the time it’s just hot takes based on generally uniformed opinions from people outside their wheelhouse. And witty retorts from everyone else with even less thought! But it’s all in good fun I guess, just as long as major investment decisions are not being made on the back of your Twitter Finance analysis.
Back to the markets. The Sept nonfarm payrolls number was 156k, and Aug was revised to 167k. That puts the 2016 monthly average at about 180k, well below the 2016 average. When I tweeted that data point, I got two fairly different responses from two widely followed finance Twitterers:
@RiskReversal Importantly, tho, still more than the ~100-150 break even estimate range for growth of labor force. BTW, excellent call on oil
— Mark Dow (@mark_dow) October 7, 2016
— Keith McCullough (@KeithMcCullough) October 7, 2016
It’s possible that both Mark and Keith are correct. And what that means to me is that the Fed is NOT (as I have been saying for months) raising Fed Funds prior to the election and maybe not at all in 2016.
For you WIRP peeps, the probability of a Nov rate hike yesterday was near 24%. It just dropped to 17% following the data. Dec has stayed pat at 64% (seems like a go as long as Oct jobs stay above the 2016 average).
Bringing it back to the stock market, I suspect yield proxies like Utilities and U.S. Telcos that have gotten nailed in the last couple weeks as expectations for a tightening cycle have increased could find a bottom and possibly catch a bid if the goldilocks scenario of meh data keeps the Fed tightening pace at 25 bps a year 🙂