A Now hiring sign at Taco Bell in Fullerton, CA, on Monday, Sept. 13, 2021.
Jeff Gritchen | Medianews Group | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
Bracing for the jobs report
U.S. stocks dipped slightly Thursday as investors braced for the September job report coming out today. By contrast, Asia-Pacific markets traded higher Friday. Hong Kong’s Hang Seng Index rose around 1.6%, though it was up more than 2% earlier in the day. Technology stocks like Alibaba, Meituan and Tencent pushed the index higher.
Yielding to high yields
The 10-year Treasury yield hit 4.8% Tuesday, a 16-year high. It’s since dropped about eight basis points, but remains at an elevated level. That’s bad news for investors and consumers because the 10-year yield influences everything from corporate financing, to mortgage rates, to currency valuations. And market watchers fear the yield could climb even higher.
20% sell-off in the S&P?
JPMorgan Chase’s Marko Kolanovic thinks the S&P 500 might be slammed by a 20% sell-off if high interest rates persist. “I’m not sure how we’re going to avoid [recession] if we stay at this level,” the firm’s chief market strategist and global research co-head told CNBC. And no stocks can escape the downturn: Kolanovic says the “Magnificent Seven” stocks are most vulnerable if a recession hits.
China plans to ease rules
The Cyberspace Administration of China proposed that data exports no longer need government oversight if regulators haven’t stipulated it as “important.” It’s still a draft rule for now, but if passed, it would significantly ease difficulties foreign companies have experienced operating in China, the European Union Chamber of Commerce in China said in a statement to CNBC.
[PRO] A ‘tremendous opportunity’
The September slump in stocks is making some stocks look cheap, said Oakmark Funds’ Bill Nygren. What’s “really unusual today” is how wide the spread is in price-to-earnings multiples, Nygren said. In other words, the gap between cheap and expensive stocks is larger than usual — which gives value investors a “tremendous opportunity.”
A quiet day in markets. But trading on Thursday was more akin to being in the eye of a storm rather than relaxing amid a spell of calm weather.
Major indexes inched down, but the moves were so small indexes were mostly unchanged. The Dow Jones Industrial Average ticked down 0.03%, while both the S&P 500 and the Nasdaq Composite lost around 0.1%.
Trading volume was subdued as well. The SPDR S&P 500 traded 70.1 million shares, below its 30-day average of 80.1 million. Likewise, the Invesco QQQ (which tracks the Nasdaq 100 index) traded around 4 million shares below its average.
Why the muted activity Thursday? Investors are bracing for the storm that is the September jobs report. Jobs data released this week have so far given a mixed picture of the U.S. labor market. The JOLTS report suggested a still-tight jobs market, the ADP payrolls report put that worry to rest slightly, while the jobless claims report was equivocal, showing a tick upward in unemployment claims — but just the smallest increase.
With such contrary signals, the Labor Department’s jobs report will be the key factor in determining whether markets remain stormy. Economists surveyed by Dow Jones expect 170,000 new jobs for September. But some banks are expecting the number to be higher. Goldman Sachs‘ forecasting jobs growth of 200,000, while Citigroup thinks it’ll be 240,000.
If the jobs report skews toward the hotter side — as those banks expect — “you can very easily put a November rate hike back on the table,” UBS chief economist Jonathan Pingle said Thursday on CNBC.
That, in turn, would push Treasury yields up even more and potentially trigger another sell-off in stocks. Then something else might break, said Bob Michele, global head of fixed income for JPMorgan Chase’s asset management division, increasing chances of a recession.
It’s a long line of conjecture, admittedly. But that’s just to show, given the volatility of markets now, how much hinges on the September jobs report.