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Payrolls watch

The U.S. Department of Labor will issue its monthly nonfarm payrolls data later today, which will be closely watched by market participants for insights into the Federal Reserve's fight against inflation. The central bankers want to see the labor market ease further to stave off a wage-price spiral, but they don't want to see it cool too much. After all, the Fed has a dual mandate of price stability and full employment, which can appear to be conflicting. That means it's always faced with a balancing act.

Economists' forecasts: Overall, economists calculate that the U.S. economy added 160K jobs in Sept., down from the 187K estimated for Aug. and the 269K in Sept. 2022. Diane Swonk, chief economist at KPMG U.S., expects to see a continued slowing in job gains in Sept. "The Fed's marathon, in terms of combating inflation, has turned into a bit of a relay race in the labor market," she told Seeking Alpha. For example, employment in individual sectors develops at differing rates. Swonk also expects Aug. numbers to be revised lower, as the total impact of the recent labor strikes hasn't been taken into account.

Job market updates: The ADP jobs report estimated that 89K jobs were added in Sept. by private employers, far less than the 150K expected, and about half the 180K jobs added in Aug. Job openings jumped in August to 9.610M from 8.920M in July, although Glassdoor's Daniel Zhao pointed out that this was largely driven by professional and business services. Meanwhile, U.S.-based employers announced 47,457 job cuts in September, compared to 75,151 in Aug., according to Challenger, Gray & Christmas.

SA commentary: Seeking Alpha analyst Justin Purohit expects job additions to be in line with estimates, if not slightly higher. "I expect data volatility to increase through Q4, as the impacts of ongoing work stoppages filter their way through the economic engine," he cautioned. Meanwhile, Damir Tokic forecast steady, but slowing job creation. "But if the new jobs created are mostly from the non-cyclical health and education sector, that's not necessarily good news for the economy and the stock market (SPY)," Tokic warned. (5 comments)

Shale consolidation

Exxon Mobil (XOM) is nearing a deal to acquire Pioneer Natural Resources (PXD), which would value the shale driller at about $60B. A deal may be finalized in the coming days if the discussions don't hit a last-minute obstacle. While Exxon held preliminary deal talks with Pioneer in April, it'd also discussed a potential tie-up with at least one other company as it sought a blockbuster deal in the shale patch. If the Pioneer deal is successful, it would mark Exxon's largest acquisition since its purchase of Mobil in 1999. The combination of the companies would also create the Permian Basin's largest producer, surpassing current leader Occidental Petroleum (OXY). (103 comments)

Costlier mortgages

Long-term mortgage rates continued to scale higher, reaching the highest level in a generation once again, as the benchmark 10-year Treasury yield (US10Y) climbed, according to a Freddie Mac survey. As of Oct. 5, 30-year fixed-rate mortgages averaged 7.49%, up from 7.31% last week and 6.66% in the year-ago period. "Several factors, including shifts in inflation, the job market and uncertainty around the Federal Reserve’s next move, are contributing to the highest mortgage rates in a generation," said Sam Khater, Freddie Mac's chief economist. To note, higher rates caused mortgage applications to drop to their lowest level since 1996 in the last week of Sept. (70 comments)

Innovation lull

3M (MMM), maker of Scotch tape and Post-it Notes, isn’t coming out with new blockbuster products the way it used to do as innovation sputters, according to some investors and former staff. Part of the lull is attributed to a change in corporate culture, while others say innovation has shifted from manufacturing to other industries such as software and semiconductor design. The cautious approach to research and development comes as 3M faces billions of dollars in liabilities over its use of PFAS chemicals and its combat earplugs. "I urge buyers to not ignore the red flags suggesting 3M seems like a value trap," warned Investing Group Leader JR Research, given the potential for more liabilities. (19 comments)

Today's Markets

In Asia, Japan -0.3%. Hong Kong +1.6%. China closed. India +0.6%.
In Europe, at midday, London +0.5%. Paris +0.8%. Frankfurt +0.9%.
Futures at 6:30, Dow +0.3%. S&P +0.3%. Nasdaq +0.3%. Crude +0.1% to $82.38. Gold +0.3% at $1,837.60. Bitcoin +0.4% to $27,797.
Ten-year Treasury Yield +2 bps to 4.74%.

Today's Economic Calendar

8:30 Nonfarm payrolls
12:00 PM Fed's Waller: “Payments”
1:00 PM Baker Hughes Rig Count
3:00 PM Consumer Credit

Companies reporting earnings today »

What else is happening...

Microsoft (MSFT)-backed OpenAI weighs making its own AI chips.

Jeffrey Gundlach: ‘Buckle up’ as yield curve is rapidly de-inverting.

Amazon (AMZN) lets go of communications staff across divisions.

Shell (SHEL) sees better gas trading earnings in Q3 than forecast.

Flowserve (FLS) drops Velan deal after French regulatory rejection.

This analyst flags weakening demand for Meta's (METAQuest 3.

Crude oil slides again, but Goldman sees recent drop as short-lived.

MGM Resorts (MGM) expects $100M hit from cybersecurity breach.

Juniper Networks (JNPR) announces layoffs, expects $59M in costs.

PepsiCo leads slump in beverage stocks ahead of earnings season.

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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