Back To Work, And Maybe Back To Normal Trading Volume?
Despite the jobs report Friday (see more below), trading volume remained low that session and has been averaging on the low side for a few weeks. That’s not too surprising, considering the time of year. Perhaps we’ll see it tick up again this week as the holiday and summer vacations end.
The low volume on Wall Street makes it a bit harder to assess recent price action. The market’s been regularly making new highs, but not with the kind of conviction that maybe the bulls would have liked to see. Once people get back and the volume ticks up, we’ll see which way the market heads and maybe get a better sense of the mood.
Instead, investors may monitor news out of Washington, D.C. for any progress on the budget or infrastructure bills. Last Friday, President Biden made a television appearance urging Congress to act, saying passage would help create jobs.
There’s also some stuff going on overseas. Investors might want to follow developments with the European Central Bank (ECB), which meets this week and announces any policy moves on Thursday. Earnings-wise, the week doesn’t look too crowded, either.
Some analysts said last week they expect the ECB to announce a tapering of Covid-related stimulus by late this year, so any hints it possibly drops at the Thursday press conference could be worth tracking, considering central banks often try to sync their policy, to some extent. The Fed meets later this month.
Bitcoin rallied over the long weekend, as El Salvador officially adopted the cryptocurrency as a form of legal tender, possibly fueling speculation that the move might spur some new forms of demand. Also overnight, Treasury yields ticked up amid inflation concerns, but both crude oil and gold—which had been rallying in recent sessions—took a dip lower.
Looking Back At Jobs Data: It’s Not All Bad
After a long weekend away, Friday’s U.S. government August jobs report seems like a long time ago. Still, it’s worth quickly diving deeper into the numbers and what they meant, especially because Fed Chairman Jerome Powell recently told investors the Fed is closely watching employment data as the central bank decides when to taper monetary stimulus.
As a reminder, job gains of 235,000 in August were more than 500,000 below the average analyst estimate for 750,000, raising new questions about the pace of economic growth as the country continues to struggle with Covid.
Overall, the numbers weren’t as bad as they looked at first glance. The headline number seems to really reflect the Delta variant. The reason? Zero jobs growth in the Leisure and Hospitality sector, which seems really odd after many months of huge gains in that category.
So it looks like many restaurants and bars that were opening just took a halt. That same metric may also have played out in the retail sector, with the government reporting a drop of 28,000 jobs there in August. Basically, the Delta variant appears to be affecting those numbers and the pace of opening of restaurants and bars.
But there were some good numbers in the report, and it would be a shame if they were overlooked. Manufacturing, professional services, transportation—all saw really nice numbers, so there were pockets of things really going quite well. The public-facing jobs are the ones where things got off track, and we may need to see another month or two of data before it’s clear if this was a momentary development or something with staying power.
Chipping Off The Old-Engine Block Supply: It’s been four decades since cars ran on standard engines and parts. Unless you’re going real old school vintage, or hoping to snatch a refurbished “hooptie,” your car needs semiconductor chips. As you know by now, the global chip bowl has been running low, and “re-ups” are getting further and further in the offing. No re-up means no new ride (or very few, at least).
So far, the consumer staples industry is up about 8% year to date, which compares with about 20% for the SPX, and about 5.7% for MDLZ, despite decent earnings that have beat analysts’ expectations. Plus the fact that we’ve been closer to the kitchen cabinet where the Oreos are kept while working from home during the pandemic. Something to chew on.
TD Ameritrade® commentary for educational purposes only. Member SIPC.
Image by Paweł Szymczuk from Pixabay
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