Morning Reads

Morning Reads

Todays Open Interest Change




The strength of the labor market has, for the most part, been surprising to the upside since the economy rebounded from the pandemic shock in March-April 2020. While that may be good news for workers, it's not what the Federal Reserve wants. Chair Jerome Powell has emphasized that the labor market remains unsustainably tight, and supply and demand need to get into better balance for inflation to retreat toward the Fed's 2% goal.

Bigger picture: Some recent data has pointed to a continued robust labor market. Wednesday's Job Openings and Labor Turnover Report showed an unexpectedly large increase in job openings, and Thursday's ADP Jobs Report also came in stronger than anticipated. For today's figures, the economist consensus expects 180K more jobs were added to the U.S. economy in May, which is still strong but a slower pace of growth, down from the 253K added in April. Meanwhile, the unemployment rate is expected to tick up to 3.5% from 3.4% in April, while average hourly earnings are forecast to grow 0.3% M/M.

Even if today's jobs figure show stronger than expected gains, which has happened nearly every month over the past year, it may not matter - unless the number really blows it out of the water. As mentioned previously on WSB, Fed officials like Patrick Harker and Philip Jefferson are calling for a pause to the rate hiking cycle this month, before making further decisions about the "extent of additional policy firming." Odds of pause have also rocketed higher on CME's FedWatch Tool, climbing to nearly 80% yesterday, from only 35% a week ago.

Commentary: While the labor market has remained surprisingly tight since the Fed started raising rates, SA analyst Damir Tokic takes an opposing view, expecting that it will start to turn negative soon. Temporary help service jobs have been falling since December 2022, currently declining at 3%-4% per month, signaling that "it is very likely that we are in a recession, or near one," he said. "The discretionary sector is likely to sell off as the overly optimistic earnings expectations get revised lower." (6 comments)

Averting default

Late last night, the U.S. Senate passed a debt ceiling package by a vote of 63-36, sending the legislation to the president's desk in time to stave off a catastrophic default. The bill suspends the debt limit until Jan. 1, 2025, in exchange for some measures that cap non-defense discretionary spending, stiffen work requirements for some recipients of food assistance, and allow the Mountain Valley natural gas pipeline. "No one gets everything they want in a negotiation, but make no mistake: this bipartisan agreement is a big win for our economy and the American people," President Biden said via tweet. "Our work is far from finished, but I look forward to signing this bill into law as soon as possible and addressing the American people directly tomorrow." (70 comments)

Groundwater disappears

In what might be a harbinger for the housing boom in the American West, Arizona is limiting approvals for new developments within the Phoenix area. A study found that around 4% of the area's demand for groundwater, close to 4.9M acre-feet, cannot be met over the next century, threatening to dampen the explosive development that has made the city one of the fastest-growing metropolitan regions in the country. Besides the groundwater crisis, Arizona has also faced significant shortages of its surface water allocation, with a recent deal cutting usage from the drought-stricken Colorado River. Investing Group Leader Ian Bezek covers the situation in Global Water Resources: Why I'm Not Worried About The Phoenix Housing Downturn. The article on GWRS is from a year ago, but SA users are still discussing it in the comments section.

Reality check

Taking aim at Apple (AAPL) before next week's expected unveiling of a mixed reality headset, Meta Platforms (META) had its own product announcement to make ahead of WWDC 2023. The company's Meta Quest 3 offers a slimmer form factor, but also higher resolution, stronger performance and "breakthrough Meta Reality technology." The 128GB headset will start at $499.99, with an additional storage version also available for purchase. That's a big price differential from Apple's headset, which is expected to come in at around $3,000, and be initially aimed at software developers and enthusiasts versus regular consumers. (28 comments)

Today's Markets

In Asia, Japan +1.2%. Hong Kong +4%. China +0.8%. India +0.2%.
In Europe, at midday, London +1%. Paris +1.3%. Frankfurt +1.2%.
Futures at 6:30, Dow +0.5%. S&P +0.5%. Nasdaq +0.5%. Crude +1.5% to $71.14. Gold +0.1% to $1997.40. Bitcoin +0.7% to $27,098.
Ten-year Treasury Yield unchanged at 3.62%

Today's Economic Calendar

Auto Sales
8:30 Non-farm payrolls
1:00 PM Baker Hughes Rig Count

Companies reporting earnings today »

What else is happening...

Before OPEC meeting: Oil data continues to fly in the face of skeptics.

Exxon (XOM) eyes new fracking tech to double oil pumped from shale.

Again! Boeing (BA) further delays crewed launch of Starliner spacecraft.

Google (GOOGL) said to be investing in text-to-video AI name Runway.

Uranium rally: Senate committee fast-tracks advanced nuclear reactors.

Dollar General (DG) slammed following disappointing sales outlook.

Macy's (M) tumbles after guidance, before turning higher on upgrade.

Some Apple (AAPL) Savings account customers hit snags on withdrawals.

Semiconductor watch: Broadcom (AVGO) reports Q2 results and guidance.

Judge in Disney's (DIS) free speech case steps aside, slams DeSantis.

Known to most as Uranium Pinto Beans, Jason has more than 15 years under his belt of trading stocks, options and currencies. His expertise primarily lies in chart analysis, and he has a strong eye for undervalued stock. Because he’s got the ability to identify great risk/reward trades he usually enjoys taking the path less traveled and reaping the benefits from the adventure.

He is a co-founder of Option Millionaires, and he is best known for his weekly webinars with Scott, as well as his high level training webinars and charts found in the forums.

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