Daily Market Update for 9/3
Summary: Investors rushed to safety in big tech today after payroll growth data came in much lower than expected. The result was losses across most sectors and indexes, but enough gains in tech mega-caps for the Nasdaq to end the day higher.
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
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Friday, September 03, 2021
Facts: +0.21%, Volume lower, Closing Range: 87%, Body: 55% Green
Good: Progress all day after a dip at open
Bad: Lower volume gain with low A/D ratio
Highs/Lows: Lower high, Lower low
Candle: Mostly green body in the middle of candle, longer lower wick
Advance/Decline: 0.47, two declining stocks for every advancing stock
Indexes: SPX (-0.03%), DJI (-0.21%), RUT (-0.52%), VIX (+0.00%)
Sector List: Technology (XLK +0.40%) and Health (XLV +0.11%) at the top. Materials (XLB -0.66%) and Utilities (XLU -0.83%) at the bottom.
Expectation:
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Market Overview
Investors rushed to safety in big tech today after payroll growth data came in much lower than expected. The result was losses across most sectors and indexes, but enough gains in tech mega-caps for the Nasdaq to end the day higher.
The Nasdaq closed the day with a +0.21% gain. Volume was lower than the previous day. The closing range of 87% came after a volatile morning which turned into a steady climb to close near the intraday high. The lower wick is longer than the upper wick, and the green body covers 55% of the candle. There were two declining stocks for every advancing stock.
The other major indexes declined for the day, with the Russell 2000 (RUT) having the most significant loss, falling -0.52%. The Dow Jones Industrial Average (DJI) lost -0.21%. The S&P 500 (SPX) declined -0.03%. The VIX Volatility Index gained +1.86%.
Technology (XLK +0.40%) led the sector list, helping the tech-heavy Nasdaq move higher. Health (XLV +0.11%) was the next best sector for the day. Materials (XLB -0.66%) and Utilities (XLU -0.83%) were the bottom two sectors. Notably, the defensive sector of Utilities underperformed today. The economic data from the morning is bad for parts of the economy but not necessarily for equities.
Nonfarm Payrolls for August grew by 235,000, much lower than the expected 750,000. However, the Unemployment Rate met expectations at 5.2%, a 0.2% improvement over the previous month. Payroll data is impacted by both supply and demand in the labor market. The Participation Rate remained the same at 61.7%, indicating that a large portion of the labor force is still not returning to work. Manufacturing Payrolls grew faster than expected.
Consider the announcements this week that Walmart will hire 20,000 workers for its supply-chain operations, and Amazon is planning to hire 55,000 technology workers across its various businesses. Those are just two companies and indicate that demand for workers will outpace supply for the near term.
The Non-Manufacturing Purchasing Managers Index was higher than expected.
The US Dollar (DXY) was down -0.11% for the day. US Treasury yields rose for the day. Bond investors expect bond tapering to be farther in the future than previously expected based on today's jobs data. The Fed has said that employment is the critical factor in their decision to begin tapering. High Yield Corporate Bond (HYG) prices rose for the day while Investment Grade Corporate Bond (LQD) prices dropped.
Silver and Gold increased sharply. Investors may be expecting further drops in the US Dollar. Timber, Copper, and Aluminum all increased. Crude Oil fell back slightly.
The put/call ratio rose to 0.626 for the day. The CNN Fear & Greed index is at Neutral, falling back from Greed. The NAAIM money manager exposure index rose to 93.95 from 92.83 in the previous week.
The four largest mega-caps gained for the day, helping to carry the Technology sector and the Nasdaq higher. Microsoft (MSFT) faded at the end of the session, ending even for the day. Other tech mega-caps outperformed as well, with Taiwan Semiconductor (TSM) and Nvidia (NVDA) leading the mega-cap list with over 2% gain. MongoDB (MDB) was the big winner of the day on the daily update growth. The stock soared +26.33% after smashing earnings estimates yesterday. In second place was another earnings beat, DocuSign (DOCU), which climbed +5.26% for the day.
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Looking ahead
Markets will be closed on Monday for the US Labor Day holiday.
There are some short-term Treasury auctions on Tuesday. Otherwise, there is not much economic news planned.
There are no notable earnings reports for the daily update on Tuesday.
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Trends, Support, and Resistance
The Nasdaq is finding resistance near the all-time high around 15,380.
The trend line from the 8/19 low points to a +1.23% gain for Tuesday.
The one-day and five-day trend lines end with a +0.24% advance for the start of the week.
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Wrap-up
That time when bad news is good news. Although the slowing growth of payrolls is a negative for the economy, there are two things to look at as a silver lining.
First, it appears that the issue in payroll growth is a supply issue and not a demand issue. That means companies are seeing growth and a need for employees but cannot attract them back into the labor force.
Second, the Fed's primary concern for the economy is employment. The fact that payrolls growth is slowing will delay a decision to start bond tapering.
The result is that we didn't see a massive sell-off of equities today. Instead, there was rotation into big tech, which is likely to benefit from continued Fed stimulus and a weaker US dollar. And Utilities, which is typically at the top of the sector list on bad news, was actually at the bottom of the sector list.
The index continues to move sideways while volume shrinks and the advanced/decline ratio moved under 0.50. Although there are reasons to be bullish, the index still indicates a Sideways or Lower move for Tuesday.
Stay healthy and trade safe!
Notes
Ideas always welcome in the comments. Errors will be amended as comments on TradingView or corrected inline in my blog.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Friday, September 03, 2021
Facts: +0.21%, Volume lower, Closing Range: 87%, Body: 55% Green
Good: Progress all day after a dip at open
Bad: Lower volume gain with low A/D ratio
Highs/Lows: Lower high, Lower low
Candle: Mostly green body in the middle of candle, longer lower wick
Advance/Decline: 0.47, two declining stocks for every advancing stock
Indexes: SPX (-0.03%), DJI (-0.21%), RUT (-0.52%), VIX (+0.00%)
Sector List: Technology (XLK +0.40%) and Health (XLV +0.11%) at the top. Materials (XLB -0.66%) and Utilities (XLU -0.83%) at the bottom.
Expectation:
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Market Overview
Investors rushed to safety in big tech today after payroll growth data came in much lower than expected. The result was losses across most sectors and indexes, but enough gains in tech mega-caps for the Nasdaq to end the day higher.
The Nasdaq closed the day with a +0.21% gain. Volume was lower than the previous day. The closing range of 87% came after a volatile morning which turned into a steady climb to close near the intraday high. The lower wick is longer than the upper wick, and the green body covers 55% of the candle. There were two declining stocks for every advancing stock.
The other major indexes declined for the day, with the Russell 2000 (RUT) having the most significant loss, falling -0.52%. The Dow Jones Industrial Average (DJI) lost -0.21%. The S&P 500 (SPX) declined -0.03%. The VIX Volatility Index gained +1.86%.
Technology (XLK +0.40%) led the sector list, helping the tech-heavy Nasdaq move higher. Health (XLV +0.11%) was the next best sector for the day. Materials (XLB -0.66%) and Utilities (XLU -0.83%) were the bottom two sectors. Notably, the defensive sector of Utilities underperformed today. The economic data from the morning is bad for parts of the economy but not necessarily for equities.
Nonfarm Payrolls for August grew by 235,000, much lower than the expected 750,000. However, the Unemployment Rate met expectations at 5.2%, a 0.2% improvement over the previous month. Payroll data is impacted by both supply and demand in the labor market. The Participation Rate remained the same at 61.7%, indicating that a large portion of the labor force is still not returning to work. Manufacturing Payrolls grew faster than expected.
Consider the announcements this week that Walmart will hire 20,000 workers for its supply-chain operations, and Amazon is planning to hire 55,000 technology workers across its various businesses. Those are just two companies and indicate that demand for workers will outpace supply for the near term.
The Non-Manufacturing Purchasing Managers Index was higher than expected.
The US Dollar (DXY) was down -0.11% for the day. US Treasury yields rose for the day. Bond investors expect bond tapering to be farther in the future than previously expected based on today's jobs data. The Fed has said that employment is the critical factor in their decision to begin tapering. High Yield Corporate Bond (HYG) prices rose for the day while Investment Grade Corporate Bond (LQD) prices dropped.
Silver and Gold increased sharply. Investors may be expecting further drops in the US Dollar. Timber, Copper, and Aluminum all increased. Crude Oil fell back slightly.
The put/call ratio rose to 0.626 for the day. The CNN Fear & Greed index is at Neutral, falling back from Greed. The NAAIM money manager exposure index rose to 93.95 from 92.83 in the previous week.
The four largest mega-caps gained for the day, helping to carry the Technology sector and the Nasdaq higher. Microsoft (MSFT) faded at the end of the session, ending even for the day. Other tech mega-caps outperformed as well, with Taiwan Semiconductor (TSM) and Nvidia (NVDA) leading the mega-cap list with over 2% gain. MongoDB (MDB) was the big winner of the day on the daily update growth. The stock soared +26.33% after smashing earnings estimates yesterday. In second place was another earnings beat, DocuSign (DOCU), which climbed +5.26% for the day.
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Looking ahead
Markets will be closed on Monday for the US Labor Day holiday.
There are some short-term Treasury auctions on Tuesday. Otherwise, there is not much economic news planned.
There are no notable earnings reports for the daily update on Tuesday.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Trends, Support, and Resistance
The Nasdaq is finding resistance near the all-time high around 15,380.
The trend line from the 8/19 low points to a +1.23% gain for Tuesday.
The one-day and five-day trend lines end with a +0.24% advance for the start of the week.
-=x=-=x=-=x=-=x=-=x=-=x=-=x=-
Wrap-up
That time when bad news is good news. Although the slowing growth of payrolls is a negative for the economy, there are two things to look at as a silver lining.
First, it appears that the issue in payroll growth is a supply issue and not a demand issue. That means companies are seeing growth and a need for employees but cannot attract them back into the labor force.
Second, the Fed's primary concern for the economy is employment. The fact that payrolls growth is slowing will delay a decision to start bond tapering.
The result is that we didn't see a massive sell-off of equities today. Instead, there was rotation into big tech, which is likely to benefit from continued Fed stimulus and a weaker US dollar. And Utilities, which is typically at the top of the sector list on bad news, was actually at the bottom of the sector list.
The index continues to move sideways while volume shrinks and the advanced/decline ratio moved under 0.50. Although there are reasons to be bullish, the index still indicates a Sideways or Lower move for Tuesday.
Stay healthy and trade safe!
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