So close, yet so far. One by one. Following the back of the head to one's front. Running, more like jogging right off the ramp. Don't really remember leaving the craft, or hitting the water. Definitely remember sinking directly to the bottom. Weighed down by roughly 85 to 125 pounds of gear. Who has the mortar?
Gave about one second's thought toward keeping my rifle dry. Yeah, right. At least I wasn't getting shot at. That said, I was still in about eight feet of water, and carrying more equipment that someone less than six feet tall probably should. Guess, I'll walk. Funny, I didn't feel like gasping for air.
By the time I reached shallow enough surf so that I could breathe, I would. Gasp, that is. I would also be crawling by then, with the waves trying to pick me up and throw me further up on the beach. Tumble, Tumble. Moonlight. Where's the tree-line?
I'll try to unscrew myself and get my team together once we reach the tree-line. Looks like we are going to low-crawl a couple of hundred yards. Are you telling me that the guys on D-Day, or Iwo Jima had to do this under fire? And then take control of the fight once they got themselves "unscrewed"? What they accomplished is almost impossible to comprehend.
On Wednesday afternoon, investors had to traverse the FOMC statement and Fed Chair Jerome Powell's press conference. There was a lot of prep. Markets went into the event strong. Thankfully. We again sank immediately to the bottom, weighed down by our gear as soon as we stepped off of the landing craft. We were lucky however. Poseidon was not angry on Wednesday. We had to get moving, but the seas were kind, and aided us in our journey toward the beach. Toward glorious, breathable oxygen.
Often equity markets will run one way on Fed Day and then the other way the following trading day. Not so, this time. Thursday would be the second day of our gauntlet. After the market's closed on Wednesday. Meta Platforms (META) would report an unspectacular quarter. However, the firm would pivot in a very responsible way toward better controlling expenses, while announcing an enormous boost to the existing share repurchase program. Huzzah !! Meta took equity markets with it. Risk-on, baby. We were on the beach, low-crawling toward the trees.
Now, just if Apple (AAPL) , Amazon (AMZN) , and Alphabet (GOOGL) could play along, things might just go "swimmingly." Then, we would just have "Jobs Day" to contend with on Friday morning. All three would, unfortunately... underwhelm. The stocks would not completely unwind the week's run for the roses, but they would not rally overnight either.
Jobs Day at Last
Treeline. Detected? Not so far. Everyone here? "Not Soto" Where is Soto? "I don't know" Says he can't swim. What? He did pass swim qual, right? He was scared. We carried his ammo for him. Alright. Small perimeter here. Stow gear, 75% alert. Soto's fire team... Find Soto. You have 240 seconds. Move.
Traders, investors and the public at large await the Bureau of Labor Statistics survey results for January this Friday morning. The data is set for release at 08:30 ET. For January, we look for job creation of about 183K seasonally adjusted (salted, peppered, and sauced) positions. Average hourly earnings growth is expected to slow to 4.3% on a year over year basis, down from 4.6% growth in January. Both the unemployment and underemployment rates are expected to show an increase for the month as participation holds steady.
The thing is this. How can we even begin to trust the data published by the BLS? We all know that for the second quarter of 2022, the cumulative total of Non-Farm payrolls reported for those months initially came to a rough 1.1M. Then, late in 2022, upon reviewing the numbers, the Philadelphia Fed published a paper that looked at those months and found that private sector job creation for those three months that comprised Q2 2022 was more like 10K, not 1.1M. Hmm, apparently the people were led to believe that the labor market was much stronger in mid-2022 than it actually was. No harm. No foul. Just an election year. No biggie.
Well, last week, on January 25th to be precise, even more information came out. Still... crickets from the financial media. Apparently, now, the BLS releases its "Business Employment Dynamics Summary" report which is done once every three months after reviewing all of the data. This summary now shows net (cumulative) private sector job losses (not gains) of 287K positions for the three months that ended June 2022. We are supposed to believe any number the BLS throws at us in almost real-time, when we now know this data to be wildly inaccurate, and in need of serious review more than half a year later?
There are better ways to count jobs or count anything difficult to tally. The ADP Employment Report relies upon actual payroll data. The BLS relies upon surveys and then extrapolates the sample results across an entire population often changing the adjustments made for seasonality and expected birth-death rates. Beyond inefficient. If algorithms know enough about you to try to sell you a bicycle for three weeks after you look at a bike on one website on a day that you were thinking about bicycles, you would think that a Federal agency could also figure out who works (at least legally) and who does not.
Incredible. On good volume too. The Nasdaq Composite soared 3.25% as the Nasdaq 100 gained 3.56%. The S&P 500 gained a more "pedestrian" 1.47% as the Dow Industrials actually gave up just a smidge. The strength was in tech and tech adjacent industries as seven of the 11 S&P sector-select SPDR ETFs gained ground for the session. The Communication Services XLC sector ran 6.57% as the Dow Jones US Internet Index tacked on an incredible 10.23% for the day. That group was led higher by META, Snap Inc (SNAP) and Pinterest (PINS) . Those three were up 23.28%, 9.93% and 8.99%, respectively.
Discretionaries (XLY) and Technology (XLK) finished the day in second and third place on the sector performance tables at +3.06%, and 2.73%. Only Energy (XLE) , at -2.28%, gave up more than 1% on Thursday.
As I mentioned, trading volume was elevated across equities, as yields remained suppressed. So, technically, you do have all of the confirmation that you need to support a broad equity market breakout at this point.
The S&P 500 has retaken its 200 day SMA, has broken above its long-term upper trendline, thus cracking the broadening descending wedge that had been in place for all of 2022, while also breaking out of that running triangle that we spoke of last week.
The Nasdaq Composite has also now broken above its 200 day SMA, as well as its bearish upper trendline, though in the case of this index, the descending wedge had already stopped broadening. The short-term technical outlook for equities would have to be optimistic. In a normal environment. If the Fed were actually changing its spots. If the economy were not teetering on the edge of recession. If Apple, Amazon, and Alphabet had not all in one way or another, disappointed last night.
I went into last night's reports long my core position in Apple, which I still hold. I did not trade around the earnings release. I did, however, get short some Alphabet going into last night's closing bell. Just felt that if one of the three would miss, it would be Alphabet. I covered that short after hours last night for a 3.7% gain. I was not risking a minor trading win earned in less than an hour overnight in this market.
Oh, good luck today kids. Buckle up. Last thing you need is to come out of the surf missing your helmet. Those things are much more expensive than you think. Oh, by the way... next week looks easy. Lower profile earnings reports, far less macro. Almost like a day on the beach. Oh, and those pesky Fed speakers are back. Kidding. Not kidding.
January Employment Situation (08:30 ET)
Non-Farm Payrolls: Expecting 183K, Last 223K.
Unemployment Rate: Expecting 3.6%, Last 3.5%.
Underemployment Rate: Last 6.5%.
Participation Rate: Expecting 62.3%, Last 62.3%.
Average Hourly Earnings: Expecting 4.3% y/y, Last 4.6% y/y.
Average Weekly Hours: Expecting 34.3, last 34.3 hours.
Other Economics (All Times Eastern)
09:45 - S&P Global Services PMI (Dec-F): Flashed 46.6.
10:00 - ISM Manufacturing Index (Dec): Expecting 50.0, Last 49.6.
13:00 - Baker Hughes Total Rig Count (Weekly): Last 771.
13:00 - Baker Hughes Oil Rig Count (Weekly): Last 609.
The Fed (All Times Eastern)
No public appearances scheduled.