Stock investors await the critical October Employment Report this morning as some anxieties start to build ahead of next week’s Midterm elections.
Wall Street expects the jobs report to show a gain somewhere between +200,00 to +230,00, versus +263,000 in September with the unemployment rate expected to tick up to 3.6% from 3.5% previously.
Maybe more importantly, wage gains are expected to fall back to a year-over-year rate of +4.7% from +5% last month. A report that is roughly in-line with expectations may not do much to rally the bulls, many of which have moved to the sidelines after the Federal Reserve on Wednesday deflated hopes that the central bank was nearing the end of its tightening cycle.
The bulls are now struggling to recalibrate, with not much in the way of positive news to help the effort. The 2-year treasury yield is +4.7% and still climbing.
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Keep in mind, the 2-year was at less than 0.5% a year ago. At the same time, we are now starting to hear of some big important companies laying people off and freezing on new hires.
Apple has paused hiring for most major jobs, Coca-Cola is offering voluntary buyouts, e-commerce platform Stripe and ride-hailing service Lyft are the latest technology companies to lay off staff on Thursday, while Amazon said it would pause new hires in its corporate workforce, and Twitter is now set to lay off up to half of its staff today under new owner Elon Musk. Adding to the wall of worry has been little to no signs that inflation is retreating and a disappointing Q3 earnings season that has highlighted the ongoing headwinds that continue to erode corporate profits.
Bottom line, the concerns and uncertainties keep piling up and it’s becoming a much steeper hill for bulls to climb.
Turning to next week, the midterm elections on Tuesday could bring some added volatility to stock markets. Historically, stocks tend to gain after midterms regardless of which party ends up controlling Washington, so perhaps the market will get a little bear bounce. Importantly, Federal Reserve policy is not impacted by changes to party control in the House or Senate so that is not a factor.
If Republicans end up with control of both houses, some think oil and gas companies could be a beneficiary. The most recent odds makers currently give the Republicans a very strong chance of sweeping both the House and the Senate. It sounds like control of Washington may come down to the races in Arizona, Georgia, and Pennsylvania.
Data to watch
The other major highlight next week is the October Consumer Price Index (CPI) due out on Thursday. There is not much data on the calendar next week otherwise with just Consumer Credit on Monday and Consumer Sentiment on Friday.
On the earnings front, results are due from Activision Blizzard, BioNTech, Diamondback Energy, Palantir, and Ryanair on Monday; Bayer, CNH Industrial, Disney, Global Foundries, Lucid, and Occidental Petroleum on Tuesday; Adidas, D.R. Horton, Rivian, and Roblox on Wednesday; and AstraZeneca, NIO, and Siemens on Thursday.
Investors Await The Critical October Employment Report
Wishing you a great week!
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