Buzz on the Street: In the US, More Jobs Than You Can Shake a Stick At
A look back at the happenings on Wall Street this week, as seen by Minyanville's Buzz & Banter.
Wednesday, July 3, 2013
For What It's Worth
I just spoke to a friend in the packaging sector who mentioned that they can't get paid on invoices sent to Chinese customers. I am passing this along because it may provide some insight into how the recent disruptions in the Chinese cash markets are impacting the broader economy. I caution that this is one comment from one company, with no specific context about how far past due these invoices are, but it bears watching accounts receivable balances when earnings start next week.
Moto X -- Born in the USA
Tomorrow, Google's (NASDAQ:GOOG) Motorola unit will unveil the Moto X smartphone, which has two interesting things going for it:
1) It is being pushed as 'the first smartphone designed, engineered and assembled in the USA'. This is a big dig at Apple, which uses the moniker 'Designed in California' for its products, which are assembled in China.
2) The Moto X is also being called 'the first smartphone you can design yourself'. This is actually more compelling, especially if it goes beyond the obvious concept of being able to select colors for the casing.
This product is worth watching. As of yet, Google's Motorola unit has been a financial disaster (though possibly a longer-term strategic win on patent/IP side). If Google simply stabilizes Motorola's market-share losing smartphone unit, estimates will have to go up.
The full rollout is coming tomorrow on the 4th of July -- stay tuned!
Thursday, July 4, 2013
Markets closed in observance of Independence Day.
Friday, July 5, 2013
NFP Instant Reaction
In a normal world, this would be a solid report:
- Revisions of +70k to prior two months shows continued strength.
- Hourly earnings bumped up a bit for May and a decent amount of 0.4% for this month -- the Fed will not like seeing that as they believe the only non-transitory inflation comes from wage inflation.
- The job mix seems like it could have been better with leisure adding a lot and manufacturing slipping.
- Household report was down to 160k and unemployment rate remained at 1.6% while those working part-time who would prefer to have been working full time increased.
But, sadly we don't live in a pre-taper, pre-QE world.
Stock futures aren't as high as they were at 3am on the European open. We were already in the throes of a rally based on some ECB statements. So, as much as we might want to think out data is driving the market, some central banker comments around the globe had a greater impact.
The real problem is that this data will spur the argument that we will see tapering sooner rather than later, and worse than, we might see rate hikes.
We are once again seeing a bear flattener with 5-year yields up more than 10-year yields which are up more than 30-year yields. Bear flatteners are not good for risk in the longer run.
I think the job report is probably in the end neutral for risk because of the increased fear that tapering will hit and that has not been supportive for stocks. The wage inflation will hit the radar screen. At the same time, these yield increases are occurring in an economy where the quality of jobs remains dubious.
You can probably safely enjoy the rest of your 4th of July weekend (as about 2/3 of the market seems out), but I think we continue to live in a world where what a few central bankers say and threaten to do across the globe trump our own data, and they all pale in comparison to the Fed's efforts to turn the market into their very own little marionette.
So an okay jobs report in the old world is likely to have mediocre consequences for the market in this central banker dominated one.
Dancing With the One Who Brung Ya, SHIBOR Edition
I have been on vacation this past week, but I wanted to take a moment to update where things stand in China. Forgive me for how busy this first chart is, but I think it's important to see the way the shape of the SHIBOR curve has changed since we called it out a few weeks ago. (see chart 1)
You'll see the front end of curve has seen a dramatic flattening in the past two weeks. Clearly the PBoC has taken a more moderate tone in its efforts to curtail credit growth. A couple of weeks ago there were concerns about whether we'd see a bank run in China. That doesn't appear to be the case now, as the second chart shows, which looks at differences in the overnight, 1 week, 2week, 1 month and 3 month SHIBOR rates to the 1 year SHIBOR rate:
You'll see the spreads have gone negative. That's actually a good thing since I calculated the difference to show inverted curves to be positive and normal curves to be negative. So the curve is starting to normalize; overnight, one week and two week rates are less than the one year rate. One month rates are still higher than one year, but that's on a path to correcting itself as well.
What will be interesting to see now is what the Fed does. Because before I went on vacation, I noted the similarities in timing on both the PBoC and the Fed in their tone and mood regarding rates, credit growth and tapering. It will be interesting to see if they continue to dance to the same tune together or not.
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Goldilocks or Not?
NQ (Nasdaq 100 futures) is bumping up against trendline resistance and battling the 61.8% retrace of the correction at 2963.50.
NFP looks like a goldilocks scenario, with the unemployment rate staying at 7.6% but a beat on employment change. However, pay attention to this NQ chart. In ETF land, PowerShares QQQ Trust (NASDAQ:QQQ) 72.76 is the 61.8% retrace which coincides with the 6/19 gap (72.76). With TNX approaching 2.7% and August 2011 levels, competition with stocks is a potential negative if you factor in the 15% gains already achieved.
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