The NASDAQ is close to correction territory as the Magnificent Seven continues to decline as evidence is lacking that AI investments are yet bearing fruit.
Bloomberg writes the “there is a real unwinding of the momentum trade, with fears rising that perhaps momentum may now be in the other direction.”
A basic premise for any company or sector to trade higher is more buyers than sellers. As written many time, there is a historical amount of monies invested in one sector and seven stocks. It appears everyone owns these companies, hence suggesting shares could experience intense volatility if broad-based selling commences.
Speaking of volatility, the “market” is suggesting 75 bps of cuts by year’s end. The yield curve is now the steepest since March 2022. What will be the ramifications of the sharpest sell off in Germany’s bonds since 1990? Will longer dated US Treasury yields follow suit?
The catalyst for the selloff in German debt was the proposed massive increase in defense and infrastructure spending.
Today the all-inclusive BLS Employment report is released. Non-farm and private sector payrolls are expected to increase by 160k and 140k, respectively, a 4.1% unemployment rate, a 0.3% increase in average hourly earnings, a 34.2 hour work week and a 62.6% labor participation rate.
Commenting on weekly jobless claims, claims fell to the muted levels seen at the start of the year. Perhaps of significance—and a data point that may become a top tier indicator—claims filed by out-of-work federal workers, which are reported separately in the report, rose to 1,634 form 614 the previous week.
This data point does not support a prevailing narrative that federal workers have been fired in mass. While some are estimating 500,000 federal workers may lose their jobs, to date it appears there is more bluster than action.
Last night the foreign markets were down. London was down 0.48%, Paris down 0.94% and Frankfurt down 1.57%. China was down 0.25%, Japan down 2.17% and Hang Seng down 0.57%.
Futures are nominally higher ahead of the jobs report. FRB Chair speaks today at a monetary policy forum. Will his remarks move markets? The 10-year is up 7/32 to yield 4.25%.
