We knew jobs day was going to be busy…and it didn’t disappoint — here’s what you missed.
Today was a tale of two markets, with the major indexes trading erratically and retail favorites like Carvana, Beyond Meat, and AMC squeezing to the upside. 🤪
Jobs were in focus, coming in red hot during July and pushing the Fed further between a rock and a hard place. We explain why a strong labor market may be interpreted as bad news for the stock market below. 👷
Here’s today’s heat map.
5 of 11 sectors closed green, with energy (+1.94%) leading and consumer discretionary (-1.63%) lagging. 💚
In international news, the game of whack-a-mole continues across Europe. Today it’s the Rhine water levels in Germany falling to dangerously low levels amid the record heat, sending shipping costs soaring and potentially affecting coal-fired power stations if water levels don’t improve. 🌊
Additionally, the Reserve Bank of India hiked rates for the third straight time, saying that 50 bps is the “new normal.” Lastly, tensions between China and Taiwan continue, sparking an alert in Japan. ⚠️
In U.S. political news, the senate has agreed on the Inflation Reduction Act. Notably, Wall Street firms were happy to learn about the scrapping of a carried interest tax provision designed to close the loophole. However, a new excise tax on stock buybacks replaced it, so it’s a mixed bag overall.
In individual company news, Alibaba (-5.01%) gave back its post-earnings pop as investors rethink its ‘turnaround story.’ 📉
Tesla (-6.63%) shareholders approved its 3:1 stock split. Additionally, Elon Musk predicted an 18-month recession and teased a possible share buyback at the company’s shareholder meeting…shortly after joking that “…making macroeconomic prognostications is a recipe for disaster.” 🤷♂️
Tesla aims to produce 20 million vehicles annually by 2030 in about a dozen factories.
Bed Bath & Beyond (32.68%) surged after it announced it’s discontinuing its Wild Sage, a private label brand launched a year ago. The move represents an overall shift in strategy that investors hope will aid the company’s turnaround. 📈
Carvana’s (+40.25%) after-hours pop continued today as investors focused on an improving gross profit per unit and number of vehicles sold. 🚗
AMC (+18.97%) roared back after announcing a new strategy that involves “APE” shares and further financial engineering. 🦍
Lastly, investors look beyond poor earnings from $BYND (+22.36%) as the stock rallies amid the meme-stock short squeeze. 🔺
In crypto news, the line between legal ownership and theft continues to blur as GameStop’s NFT market receives backlash for unlicensed game sales. Also, Voyager will return $270 million in customer funds after saying it received “higher and better” buyout offers than what AlamedaFTX presented. Finally, hacked crypto startup Nomad has offered hackers a 10% ‘bounty’ if they return the $190 million they stole. ₿
Here are the closing prices:
Today’s highly-anticipated jobs report was an absolute blowout. 📈
The U.S. economy added 528,000 jobs in July, and the unemployment rate dropped to 3.5%, well above Wall Street expectations for 258,000 jobs. 💪
While some preliminary economic data hinted at a softening labor market, today’s report pretty much negated all of that. ❌
Although strong jobs data is positive news for the economy in that the current “recession but not a recession” environment may not be as bad as some are making it out to be, it just made the Federal Reserve’s job a hell of a lot harder.
The Fed has been trying to bring down demand since inflation is well above its 2% target. However, it is once again staring down the barrel of a major supply issue. The labor force participation rate remains below pre-pandemic levels, and the number of job openings outnumbers available workers by nearly 2 to 1. 😮
The tight labor supply is driving up wages, which rose 0.5% MoM and 5.2% YoY. Since wages are a sticky input cost, they’ll continue increasing pressure on overall inflation. 🔥
And since the Fed cannot control the supply of labor, oil, or other major inflation drivers affected by structural economic issues, its only choice is to continue its war on demand.
Essentially, the Fed will try to break the economy just enough to bring down prices towards its 2% target. That should mean lower growth and a weaker labor market, but we’re not seeing those effects just yet. 🔨
As a result, the Fed will likely stay aggressive at its next few meetings. That vibes with much of what we heard from various Fed Governors this week and what the bond market is now pricing in.
It also means that the stock market will have to rethink its recent rally. Part of the rebound in tech stocks was driven by hopes that the Fed would have to become more accommodative beginning early next year. But…the job market clearly messed with those plans.
We’ll have to see how the market adjusts to this change in expectations over the next few trading days and weeks. 👀
For now though, good news for the economy may be bad news for the stock market. 🙃
To wrap up an earnings and fundamental-news-packed week, we will highlight a chart making the rounds among the technical analysis community. 📈📉
Today we’re highlighting a concept called polarity, which we highlighted back in early June when the market reversed from current levels. Essentially the idea means that areas of support become resistance when broken and vice versa.
Below we see that concept at work around the $415 level in the $SPY ETF. 👇
Technical analysts are paying attention to this area for two main reasons. ✌️
First, the market is pausing at the same level it did back in June before prices continued their downward trend. Although the environment feels different than it did two months ago, this area clearly has price memory as prices stopped making progress about a week ago.
The second is the ascent of the rally, which has been steep. The market has gone up roughly 15% in about two months, leading some analysts to believe that a consolidation (period of sideways trading) would be healthy and set the market up for a more sustainable move higher.
Bearish analysts view this retest of resistance as an opportunity to get rid of long positions or initiate short positions, expecting a decline as we saw in June. 🔻
Who will be correct remains to be seen, but what happens from current levels will likely set the tone for the overall market over the coming weeks. 🗓️
We’ll be watching closely. 👀
Bullets From The Day:
💰 Pfizer eyes a $5 billion acquisition. Pfizer is in advanced talks to buy drugmaker Global Blood Therapeutics as competition in the biotech spaces heats up. The company’s treatment for sickle cell disease received U.S. approval in 2019, and its pipeline of drugs makes it a prime target for a cash-flush Pfizer. Reuters has more.
🔬 A new partnership looks to accelerate oncology medicines in China. Sanofi and Innovent Biologics are entering a strategic collaboration to accelerate the development of oncology medicines for cancer patients in China. In addition to their strategic multi-production partnership, Sanofi will invest an initial 300 million euros in Innovent. More from Yahoo Finance.
🤖 Amazon creeps farther into your home with its $1.7 billion Roomba purchase. Whether you want it to have your data or not, Amazon is coming for it. The company is adding to its smart-home arsenal by acquiring the maker of Roomba vacuums, iRobot. While some analysts see this as a random move for Amazon, others see it as a way for it to collect more information about a person’s home and overall habits. If capitalism has taught us nothing else, it’s that nothing major corporations do is by accident. There’s always a larger agenda at play. CNBC has more.
🪑 India pushes for a seat at the global M&A table. The country has emerged as a significant overseas market for several global tech giants, and it’s now looking o leverage its vast reach to influence M&A activity overseas. New Delhi has proposed amendments to its Competition Act, 2022, requiring the permission of the Competition Commission of India for all overseas deals over $252 million in value for firms with “substantial business operations in India.” More from TechCrunch.
🦸 Another ‘Super’ idea from Meta. The company is testing a new live streaming platform for influencers called ‘Super’ as it attempts to figure out how to bring its Metaverse vision to reality while keeping pace with other social media giants like TikTok. The company is testing it as a standalone experiment with a small group of creators who can host live streams, earn revenue, and engage with viewers. TechCrunch has more.
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