Yesterday, the market finally broke out of a vice-grip trading range that was more frustrating than ominous. Meanwhile, the wild gyrations continue. This time, there was a sense of urgency that the train was leaving the station, which powered early buying. Some of the individual moves higher were astonishing. Of course, many of these names have been hammered and still remain underwater for the year.
We got rotation out of bonds and equity safe havens, but after breaking the Walls of August, the next big test will be getting back to all-time high levels.
To make that happen, yesterday’s session served as a great template for what leadership should look like: beaten down Industrial names, and perhaps new leadership from Financials.
S&P 500 Index
Communication Services (XLC)
Consumer Discretionary (XLY)
Consumer Staples (XLP)
Health Care (XLV)
Real Estate (XLRE)
Once again, there was another sizeable drawdown of crude inventories. The 4.8 million barrels brings the tally to 60 million since early May. Interestingly, the pop in West Texas Intermediate (WTI) didn’t hold.
Back in July, I cautioned investors about the pending WeWork initial public offering (IPO). Back then, it was reported that the company founder Adam Neumann cashed out of $700 million in stock to invest in real estate and start-ups. It reminded me of the debacle called World Online, which I still say silently that it triggered ‘popping’ of the tech and telecom bubble.
Yesterday, the company’s pre-IPO valuation was sliced to $25 billion from $47 billion a week earlier. Yikes!
Today’s Jobs report, I think, must be good news and should be treated as good news if my guesstimate is correct.
175,000 are worried about goods-producing (dirty fingernail) jobs.
We are hoping for another spike in participation like July:
- White: +97,000
- Hispanic: +84,000
- Black: +284,000
- Private jobs +96k with notable gains in health care and financial activities.
- Unemployment payroll +130k vs 150k consensus, boosted y 25k workers for 2020 census.
- Unemployment rate unchanged at 3.7%
- Average hourly earnings 3.2% y/y vs 3% consensus.
- Labor participation 63.2% in August from 63% in July and 62.7% a year ago, while the employment-population ratio rose to 60.9%
- Industries with solid gains included professional and business services +37k and Construction +14k
- U-6 rose to 7.2% from 7%.