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Todays Open Interest Change
The U.S. labor market appears to be easing, according to latest jobs data, but investors are awaiting the payrolls report to be released tomorrow for further proof that the Federal Reserve could end its rate-hiking cycle. Jobless claims, expected later today, will also be closely watched. Note that Good Friday is not a federal holiday. The consensus estimate is for nonfarm payroll to increase 239K in March vs. +311K in February, with unemployment rate unchanged at 3.6%. The payrolls report will be the last one ahead of the Federal Reserve's meeting in May. Fed funds futures show an ~59% chance of no hike and ~42% probability of a 25-basis point increase.
Backdrop: Markets are expecting further easing of the labor market after the latest ADP report showed a slower pace of hiring. "Employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down," said ADP Chief Economist Nela Richardson. In addition, job openings declined more than expected in February's JOLTS report to 9.931M, marking the first time the number dropped below 10M since May 2021. "This could be the first signs of weakness in the labor market and that is huge," said Craig Erlam, senior market analyst, OANDA. "Without it, the Fed will find it very hard to make the argument that it is pausing the tightening cycle. Now it needs to be backed up and the jobs report on Friday could start that process."
Expectations: Deutsche Bank economists expect March numbers to come in stronger than 250K, which would be the second-slowest pace of monthly job growth over the last two years. "Bear in mind however, that even though we've had some weak data on the employment side, the January ADP report came in beneath expectations, but nonfarm payrolls went on to surge by +517K on the initial estimate, so there's still scope for a wide range of outcomes tomorrow," said strategist Jim Reid.
SA commentary: Lawrence Fuller, leader of the investing group 'The Portfolio Architect', said the JOLTS data was exactly what the Fed wants to see. "I see it as reinforcing my outlook for a soft landing later this year, as well as allowing the Fed to end its rate-hike cycle with a terminal rate of 4.75%-5%," he projected. SA contributor Damir Tokic expects a significant effect on markets if Friday's jobs report confirms significant weakening. "However, the key indicator going forward will be weekly unemployment claims. Research shows that weekly claims strongly predict the monthly payroll report, especially in a weakening labor market." (3 comments)
The Federal Deposit Insurance Agency hired BlackRock (BLK) unit Financial Market Advisory to sell the crippled securities portfolios of failed regional lenders Silicon Valley Bank (OTC:SIVBQ) and Signature Bank (OTC:SBNY). The face values of the portfolios - mostly comprised of agency mortgage-backed securities, collateralized mortgage obligations and commercial mortgage-backed securities - of SVB and Signature stood at $87B and $27B, respectively. First Citizens Bank (FCNCA) is buying Silicon Valley Bank's deposits and loans at a sizeable discount, while New York Community Bancorp.'s (NYCB) Flagstar Bank is buying Signature's deposits and some of its loans. The acquirers had rejected the lenders' securities portfolios as they would have had to realize losses due to elevated rates. (10 comments)
Walmart (WMT) expects inflation to be “more normalized” in 2024 and inventory to fall back toward historical norms as well, it said at its investment community meeting yesterday. The retailing giant's CFO John David Rainey said supply chains improved considerably, along with inventory levels. Bloated inventory levels had been a persistent problem for major retailers for much of 2022. Rainey expects inflation to remain stubbornly high in 2023 before normalizing into 2024. SA contributor Geoffrey Seiler said Walmart is a solid defensive stock in the event of a recession. "As a low-cost leader, it should regain market share with any economic softness. It is also riding the wave of inflation to generate higher profits." He said the retailer's guidance is "pretty cautious" and it should be able to top it in 2023. (13 comments)
Sundar Pichai, CEO of Alphabet (GOOG) (GOOGL) announced plans to integrate conversational artificial intelligence features to the company's flagship search engine following the breakthrough success of Microsoft's (MSFT) ChatGPT. Such advances in AI could help Google answer queries faster. Even though Pichai declined to comment on the product's availability without a wait list, he made it apparent that Google would keep improving its Bard chatbot and is also focused on adding AI features that will enhance work-related products such as Gmail. SA contributor Growth at a Good Price believes Bard is no failure. "Rather, it’s an approach to chatbot development that is suitable for Google. Cautious, methodical and prudent, it helps test the waters with mass LLM deployment without risking its juicy search margins." (1 comment)
In Asia, Japan -1.2%. Hong Kong +0.3%. China flat. India +0.2%.
In Europe, at midday, London +0.7%. Paris +0.4%. Frankfurt +0.4%.
Futures at 6:30, Dow +0.04%. S&P +0.01%. Nasdaq -0.2%. Crude -0.1% to $80.52. Gold flat at $2035.20. Bitcoin -2.2% to $27,909.
Ten-year Treasury Yield flat at 3.28%
Today's Economic Calendar
7:30 Challenger Job-Cut Report
8:30 Initial Jobless Claims
10:00 Fed's Bullard Speech
10:30 EIA Natural Gas Inventory
1:00 PM Baker-Hughes Rig Count
4:30 PM Fed Balance Sheet
Companies reporting earnings today »
What else is happening...
Tesla (TSLA) nearly triples total workforce at Austin gigafactory.
Amazon (AMZN) eyes reduced stock awards for employees in coming years.
Costco (COST) comparable sales slow in March, stock falls 3% after hours.
Disney (DIS) changes streaming heads; Perlmutter speaks out on firing.
GSK (GSK) ordered to pay more royalties to AstraZeneca (AZN) on Zejula sales.
AbbVie (ABBV) 2023 earnings guidance range below consensus.
Shell (SHEL) updates expectations for Q1 production, earnings.
Samsung (OTCPK:SSNLF), AMD (AMD) renew GPU architecture pact.
Nvidia (NVDA) slips as Google (GOOG) touts prowess of own custom chips.
AMC (AMC) up, APEs (APE) stumble as court rules against conversion settlement.