Precious metals are angrily bid this morning (even as copper and crude tumble) after the dismal US jobs data sent the USD reeling and raised expectations for moar QE down the line. Silver is up 5% on the day - the biggest daily jump since Dec 1st 2014 and gold is up 2.2% - its best day since April.
Guess who: “CLAIMS” AND NONFARM PAYROLLS: It’s A Very “Tidy” Correlation Indeed: This wonderful chart, courtesy of TD Securities, shows how almost perfectly jobless claims and non?farm payrolls correlate, and so with “claims” falling as they have, payrolls today could be surprisingly high."
In addition to the Fed's credibility, one other privately-controlled organization that has seen its credibility completely crushed in recent months is the Goldman economic forecasting team (if not the team that "forecasts" Fed monetary policy, simply because Goldman controls the Fed and tells it what to do; as such what Goldman "thinks" the Fed will do is usually ironclad) whose Jan Hatzius "for what it's worth" forecast above trend growth for the US economy in 2014. So, "for what it's worth", here is Goldman jobs report post-mortem (in a parallel report Goldman just cut its Q3 GDP forecast from 2.0% to 1.9%), in which the bank admits that the report was a disaster, and that as a result "we now see action at the December meeting as a close call."
Bloodbath for a near record short net Treasury speculative position as rate-hike odds collapse and the entire UST curve plunges. The belly is collapsing 13-15bps (biggest drop in 5Y and 7Y yields since January) and the long-end is dropping significantly. Between the 10Y highs of 2.0597% and lows of 1.9022%, the drop was 15.75bp - that is the biggest intraday drop since Sep 18, 2013, the day the Fed did not Taper. All yields are now lower on the year with 5Y near 2015 lows (down 42bps since end-Dec).
In business, the 80/20 rule states that 80% of your business will come from 20% of your customers. In an economy that is more than 2/3rds driven by consumption, such an imbalance of the "have" and "have not's" impedes real economic growth.
If you thought the headline jobs print was bad, wait till you see this.
For the 10th month in a row, US Factory Orders dropped year-over-year - the longest streak outside of a recession in history. Against expectations of a 1.2% decline MoM, August dropped 1.7% which is the worst MoM drop since Dec 2014, with a 24% drop MoM in defense new orders and capital goods. Most worrying however is the rise in the inventories-to-shipments ratio once again to cycle highs after a hopeful dip lower in July.
US financials' stocks are tumbling as 'investor' hopes for a rate-hike (and some dream about better earning potential for banks) drag XLF (Financials ETF) back to Oct 2014 lows. However, as have noted before, it is the message of the credit markets that has been correct all along (and stocks continue to catch down) as today's jobs data (and Glencore asset sales) poke Financials credit spreads to their highest since Oct 2013.
Central bank intervention/financial repression provides the illusion thay systemic risk has been disappeared, and this pushes all asset classes into correlation. The idea that some assets will escape the implosion is also illusory; what appeared uncorrelated can suddenly correlate overnight, destroying the entire fantasy that risk can be offloaded onto others.
Participation Rate Crashes To October 1977 Level: Americans Not In The Labor Force Soar By 579,000 To Record 94.6 MillionSubmitted by Tyler Durden on 10/02/2015 09:02 -0400
While the September jobs number was an absolute disaster, here is the real punchline: in September, the people not in the labor force soared by a whopping 579,000 to a record 94.6 million, up from the previous record 94.0, even as number of people employed - according to the household survey used to calculate the "5.1%" unemployment rate - tumbled by 236,000 to 148.8 million. 62.6% to 62.4%, it was the lowest since October 1977.
"Inconceivable." With the total destruction of the "faith" in The Fed's pr0mised "recovery," stocks and bond yields are collapsing. A glance at the crash in fed reigional surveys should have given the market a hint (and credit did) but US equity markets are in free-fall and gold and silver are surging. Treasuries rallied hard on the bursting of the faith bubble with 10Y yields plunged back under 2.00% and 30Y yields broke below the 200-day moving average.
The 30 stocks of the Dow Jones Industrial Average currently trade for an average of 14.8x next year’s consensus earnings. But... Everyone knows Wall Street analysts are always too optimistic, so what if we just look at the lowest estimate for each company? The driver of market pessimism sits at the top of the income statement – the Street’s worst case revenue estimates call for a decline of 1.7% in 2016. Now, Q3 earnings season is unlikely to provide much comfort here; why should corporate managements go out on a guidance limb when their stocks are down on the year? All this points to further volatility in October, and with a bias to the downside.
- U.S., Allies Demand Russia Stop Attacks on Syria Opposition (BBG)
- Russian Airstrikes Defend Strategic Assad Regime Stronghold on Syria’s Coast (WSJ)
- Emerging Stocks Head for Weekly Advance Before U.S. Jobs Data (BBG)
- Wage Strife Clouds Car-Sales Boom (WSJ)
- Oregon town reels from classroom carnage (Reuters)
- Oregon shooter came from California, described as shy and skittish (Reuters)
It has been a cruel summer, with lots of leverage, for Bill Ackman and his Pershing Square hedge fund.