Stocks Rise Before Jobs Revisions as Target Up 15%: Markets Wrap

(Bloomberg) — Stocks rose as traders parsed a fresh batch of earnings from retailers ahead of data will bring more clues about the health of the economy in the run-up to Jerome Powell’s highly-anticipated speech on Friday.

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Equities resumed its August advance, following a small S&P 500 drop that halted an eight-day winning streak. Gains were more muted though as Wall Street geared up for the preliminary annual revision to US jobs growth. That’s not something that would usually impact trading, but it could add some volatility. And that’s due to all the recent concern that the labor market is cooling too much amid elevated Federal Reserve rates.

The S&P 500 hovered near 5,610. Target Corp. climbed 15% after ending a string of sales declines in the second quarter, citing improved discretionary spending. Macy’s Inc. slightly missed analysts’ estimates for its quarterly revenue and lowered its outlook for sales during the rest of the year.

Treasury 10-year yields were little changed at 3.8%. Swap traders are again pricing 100 basis points of Fed cuts in 2024. Traders will also scour minutes from the latest Fed policy meeting, at which the central bank held interest rates steady. Any clues on the path ahead for rates will be in focus, as well as any guidance on when the Fed will complete its current course of quantitative tightening.

Wall Street on US Payroll Revisions:

US benchmark payroll revisions over-hyped? Dollar may benefit from buying on fact after being sold on rumors.

The preliminary annual revision to US jobs growth is front and center today. It has gotten more play that usual, amid speculation of a historically large revision. Yet, the direct impact on policy may be minimal. Federal Reserve officials, including Chair Powell, acknowledged that the payroll growth may have been overstated.

A significant downward revision could rekindle the recession fears initially sparked by the July jobs report which would result in broad market volatility.

This matters because the market is very sensitive to soft labor market data and we know that from the recent pop in jobless claims and July jobs report. So, while investors are OK ignoring most disappointing data, they aren’t ignoring soft labor market data and if these revisions are worse than expected, look for it to weigh on stocks today.

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This is typically not a market-mover. However, given the current intense focus on the labor market, this year’s revisions could have a greater than usual impact.

This isn’t a release that is typically a market event, although given the market’s recent emphasis on the cooling seen on the labor front, it follows intuitively that investors are eager for any insight to help guide expectations for what might be next for the employment figures.

While the resilience of the labor market is sure to come under scrutiny, we’re skeptical the information holds the needed weight to justify more than a 25 basis-point move in September.

Based on conversations with investors, people seem to expect a large downward revision would increase the odds of more aggressive rate cuts signal at Jackson Hole. Ultimately, revisions won’t matter though. They are important in what they signal for demand, and demand indicators were fine from March ’23 to March ‘24. High-frequency data matters much more right now.

There is broad consensus that those months of data will be revised downward, suggesting a weaker job market than initially reported. There are a number of factors that help put the revisions into context. In short, we don’t think the revisions today will significantly change the way the Fed views the labor market.

Our baseline expectation is that the revisions will not materially change the Fed’s interpretation of the labor market right now, though the market could react nonetheless.

Corporate Highlights:

• Ford Motor Co. is recalibrating its electrification strategy yet again, canceling plans for a fully electric sport utility vehicle in a shift that may cost the carmaker around $1.9 billion.

• Walmart Inc. raised about $3.6 billion by selling its stake in Chinese e-commerce firm JD.com Inc., winding down an eight-year partnership that appears to be paying diminishing returns amid a challenging landscape for Chinese tech giants.

• US coal producer Consol Energy Inc. agreed to merge with Arch Resources Inc. in a $2.3 billion deal as the transition to greener fuels threatens the industry’s long-term outlook.

• Brookfield Asset Management is asking banks to line up about €9.5 billion ($10.6 billion) of debt for its potential take-private deal for Spanish pharmaceutical producer Grifols SA, according to people with knowledge of the matter.

Key events this week:

• Eurozone HCOB PMI, consumer confidence, Thursday

• ECB publishes account of July rate decision, Thursday

• US initial jobless claims, existing home sales, S&P Global PMI, Thursday

• Japan CPI, Friday

• BOJ’s Kazuo Ueda to attend special session at Japan’s parliament to discuss July hike, Friday

• US new home sales, Friday

• Jerome Powell speaks in Jackson Hole, Friday

Some of the main moves in markets:

Stocks

• The S&P 500 rose 0.2% as of 9:33 a.m. New York time

• The Nasdaq 100 rose 0.2%

• The Dow Jones Industrial Average rose 0.2%

• The Stoxx Europe 600 rose 0.4%

• The MSCI World Index rose 0.2%

Currencies

• The Bloomberg Dollar Spot Index rose 0.1%

• The euro was little changed at $1.1121

• The British pound rose 0.1% to $1.3048

• The Japanese yen fell 0.2% to 145.55 per dollar

Cryptocurrencies

• Bitcoin was little changed at $59,330.66

• Ether fell 0.7% to $2,573.05

Bonds

• The yield on 10-year Treasuries was little changed at 3.80%

• Germany’s 10-year yield declined one basis point to 2.20%

• Britain’s 10-year yield was little changed at 3.91%

Commodities

• West Texas Intermediate crude rose 0.4% to $73.49 a barrel

• Spot gold fell 0.4% to $2,503.78 an ounce

This story was produced with the assistance of Bloomberg Automation.

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