Stock Markets Analysis and Opinion

NFP Preview: S&P 500 Bulls Might Charge Higher Regardless of Data Today

2024.05.03 02:39

Stocks rebounded yesterday, with the climbing by 90 bps, ahead of what will be another big data point and the last major data point until the report. I am thankful. The run over the past week-and-a-half, along with earnings, has been tiring and, at times, rather stressful. So, with the release of the employment report and the report at 10 AM, the market will finally have a chance to figure out what the last two weeks have given us.

If yesterday’s and showed anything, it is that productivity is non-existent, costs are increasing, and what we are seeing is an economy powered by rising prices. Because at the end of the day, today’s wage data is expected to rise by 4% y/y and by 0.3% m/m. If productivity in the first quarter was just 0.3% Q/Q SAAR, and wages are growing by around 4%, then does that imply a 3.5% to 4% inflation rate? It certainly sounds right based on the latest CPI data points.

are expected to increase by 240,000 compared to last month’s 303,000, while the remains at 3.8%. Then, at 10 AM, ISM services are expected to increase to 52 from 51.4, while prices paid are expected to rise to 55 from 53.4.

The index took a big tumble last month, and it seemed highly unusual, so it will be interesting to see how much it bounces back in April. Generally, prices in , manufacturing, and services tend to move together, so the move lower last month was odd, and I would expect to see a bigger rebound this month. We will have to see.PMI Report

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Despite everything, the rate moved lower yesterday, and it was not what I expected. This week, we have had plenty of data to push the 10-year up, but it didn’t. I’m unsure if it is waiting for data today, but we will find out. If it doesn’t jump today, then the odds will rise; we will head back to 4.35% first, which would be disappointing.US 10-Year Yield-Daily Chart

The also pulled back yesterday, and like the 10-year, there is no doubt whether it will continue higher or not. At this point, it will take a hot job report today to get the moving up.DXY-Daily Chart

Reserve balances crept higher this week as the reverse repo and the TGA fell yesterday, allowing the reserves to rise. Reserves are still rather low at $3.3 trillion, and while they are likely to rebound some, I don’t think they will return to the highs we saw at the start of 2024. So, for now, we will have to continue to watch how trades to give us a sense of the liquidity flows.Reserve Balance

The 1D and the S&P 500 moved higher yesterday. However, after today’s job report, the VIX1D will probably crater again. So again, a move higher in the S&P 500, regardless of the data, seems probable given the implied volatility reset that will be needed. Once IV resets, the market will trade “normally” again.VIX Daily Chart

Finally, I noted yesterday that Apple (NASDAQ:) had a lot of gamma built up between $175 to $180 in the options, and that a move over $180 might be met by sellers once regular hours trading resumed on Friday. I have owned the stock for a long time, and the move higher in the share seems overdone to me. Additionally, the guidance was okay but nothing great, and it sounds like gross margins are a bit lite versus estimates. Also, when the company was probed by analysts on iPhone sales being down mid single digits, which would be more than expected, Tim and Luca got a little weird. So would I be surprised to see the stock trading back below $180 today, not at all.Apple Inc Stock Chart

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