Breakfast Bites - Macro Data spooks the Market

Rise and shine everyone.

It’s Jobs Friday! After yesterday’s Jobless Claims spike and US PMI / ISM report spooked traders, markets are apprehensive of the unemployment report. Amazon’s earnings didn’t help either. The stock is down 8.8%.

The tech sell-off spread to Asia with chip stocks lower this morning. The strength in the Yen is also putting pressure on the Nikkei, as exporters make up a large portion of the market there. It’s not so much the 25-bp move that the BoJ made but, the fact that the BoJ is willing to alter policy to defend the Yen. This is gradually sinking in among market participants.

European markets are also feeling the pressure.

The Vix spiked and crossed 20. There’s some serious weakness in the market.

US Equity Futures are down over 1% in the pre-market, with the Russell 2000 futures down over 2%. The rotation to small caps was not really sustainable and if there are fears of a recession, I can’t imagine that small caps will be the place to hide.

And this is fear of a recession. We can see it in the risk-off nature of sector rotations. All the defensives were up yesterday, and traders are now pricing in 3 cuts for the rest of the year - Sep, Nov, and Dec.

US Jobs Market - What of the Sahm’s Rule?

Nonfarm Payroll is expected to come in slightly lower. Some of that is due to the effect of Hurricane Beryl last month.

One major focus for today will be whether the Sahm’s rule gets triggered. If the unemployment rate holds at 4.1% in July, the three-month average of unemployment will be 0.56% above the low of the previous 12 months (3.5%).

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