Pavlov has trained their traders well
Unemployment and an earnings bonanza
The BLS released their employment data this morning and the big headline was that unemployment has jumped higher.
According to TradingEconomics:
“The unemployment rate in the US increased by 0.2 percentage point to 3.7 percent in October 2022, up from September's 29-month low of 3.5 percent and slightly above market expectations of 3.6 percent. The jobless rate has been in a narrow range of 3.5 percent to 3.7 percent since March, suggesting that the labor market is already very tight, which, in turn, is likely to contribute significantly to inflationary pressure in the world's largest economy for some time to come. The number of unemployed persons rose by 306 thousand to 6.06 million in October, while the number of employed decreased by 328 thousand to 158.6 million. The labor force participation rate edged down to 62.2 percent from 62.3 percent.”
Now this info came out before the market open. Many market participants looked at the headline number (3.7% unemployment rate) and didn’t see any significant data. But once you look under the hood, you realize that the employment situation is not as cherry as it first looked.
Mish has a great take on this with his article titled, “Lost in the Strong Jobs Meme, Full Time Employment is Down 572,000 Since May”.
“Today the unemployment rate rose to 3.7 percent. Last month it was at a record low. But as I have been saying for many months, don't watch the unemployment rate, watch employment levels. Due to tech and finance layoffs, I expect significant employment declines starting next month. Since March, these reports have been a tale of two headlines, seemingly at odds: strong jobs but weak employment.
October is usually a big month for hiring as firms begin the big push for 4th quarter/holiday sales. We didn’t see any of that in this report. Thus the market had a significant reaction. Traders immediately had a Pavlov dog response and everything was bid. This was because they foolishly believe that this kind of data could be significant enough to make the Fed pivot. Unfortunately, this is the exact response that the Fed wants to break. Besides that, the Fed is more concerned with inflation data than employment.
The more interesting reaction was oil, silver, and gold (OSG). While the market shot up, came down, and then finished up. OSG went up and stayed up. We also saw significant reactions from natural gas (+8.29%), copper (+7.61%), and propane (+3.17%).
This leads me to earnings…