HOWL - Wall Street Lunch: Jobs Report Lags

2023-11-03 12:32:00 ET

Summary

• Oct. nonfarm payrolls came in weaker than expected, unemployment rate ticked up to 3.9%.
• AI will likely make all jobs obsolete at some point in the future - Elon Musk.
• BofA releases two feast and famine charts from the broader market.

Listen below or on the go on Apple Podcasts and Spotify

There are signs of a loosening labor market that the Fed will like. (0:15) The 10-year Treasury yield tumbles again . (1:40) Will AI eliminate every job? (3:19)

This is an abridged transcript of the podcast.

Our top story so far

The October jobs report came in weaker than expected, which brought out stock and bond bulls.

A looser labor market would likely be the final piece in the puzzle for the Fed and this tightening cycle.

Nonfarm payrolls rose +150,000, lower than the 180,000 expected. The unemployment rate ticked up to 3.9%, and average hourly earnings rose 0.2%, softer than forecasts for 0.3%.

Janney's Guy LeBas notes that there was a lot of noise from strikes worth about 30,000 up or down on payrolls, while a downward revision of 101,000 tempered the big gain in September, although it's "still strong."

Pantheon Macro says, "Wage growth is slowing; the 3.2% annualized increase between July and October was the smallest three-month increase since March 2021 and is in line with the pre-pandemic pace."

While the numbers are volatile, "right now the numbers look good, and they reinforce the message from the ECI wages data and leading indicators, notably the quits rate, which also is back to its pre-pandemic level."

The report helped continue the everything-is-awesome trade. Yesterday productivity came in strong, but that didn’t matter as the Fed won’t hike, and today jobs came in weak, and that means the Fed can start cutting sooner.

Janney's LeBas says "there's nothing (in the report) that would advocate against the Fed's current 'hold' bias."

The market odds of a rate hike in December fell below 10%, while swaps brought in rate-cut expectations for the June meeting.

Stocks are higher, with the S&P 500 ( SP500 ) looking well on its way to its best week since June.

There is even more action in the Treasury market, where the 10-year yield ( US10Y ) briefly fell below 4.50%, battling its 50-day moving average.

It was just above 5% nine sessions ago and is seeing its largest five-day move since March.

Now looking to active stocks and earnings

Casino stocks are in focus. The culinary and bartenders unions in Las Vegas have set a strike deadline of November 10 at 5:00 a.m. Pacific for 35,000 hospitality workers to walk off the job.

The strike threat came after seven months of unsuccessful negotiations with MGM Resorts (MGM), Caesars International (CZR), and Wynn Resorts (WYNN). The Culinary Union said it is intensifying preparation for the largest hospitality worker strike in U.S. history by amassing supplies and materials to maintain 45 different strike stations with multiple picket lines around resorts on the Las Vegas Strip.

Skyworks Solutions ( SWKS ) reported fourth-quarter results and issued guidance for the coming quarter that Wall Street said is showing "glimmers of hope."

Baird analyst Tristan Gerra said that even though Skyworks' key markets are "still depressed" in the near term, release 18 should help content growth "reaccelerate somewhat."

And shares of Werewolf Therapeutics ( HOWL ) surged after announcing two partial remissions in an early-stage clinical program for WTX-124, one of its lead cancer candidates targeted at solid tumors. Werewolf said that the treatment caused dose-dependent biomarker and antitumor activity in its recent trial. (Tough not to think of the Young Frankenstein ‘Therewolf” joke.)

In other news of note

Elon Musk says artificial intelligence will likely make all jobs obsolete at some point in the future.

"There will come a point where no job is needed," he told U.K. Prime Minister Rishi Sunak at an event. "You can have a job if you want for personal satisfaction. But AI will be able to do everything."

Musk's statements follow the U.K. government's two-day summit in Bletchley Park, where world leaders and major AI organizations signed a landmark agreement for safety testing of frontier AI models.

Tough to say if Musk meant all jobs everywhere or knew how we’d survive. But a sharp Seeking Alpha subscriber commented that there are likely two future paths with AI: Star Wars, where AI robots co-exist with humans, or Dune, where a rebellion crushes the machines.

Head on over to the story on Seeking Alpha, where there’s a lively debate on AI happening. To weigh in, head to Seeking Alpha Subscription Plan Pricing .

And to wrap things up, in the Wall Street Research Corner

BofA is out with two feast and famine charts from the broader market.

The price of bank stocks vs. the S&P 500 is at an 80-year low amid a market “regime change.” But this could be a great contrarian entry for bank stocks, according to strategist Michael Hartnett.

Hartnett also points to a new all-time high for tech stocks vs. the S&P, which he says indicated investors pricing in an “AI miracle bull” much more than they are pricing in inflation.

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