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Markets Up for the Week (So Far) on Inflation and Jobs
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Thursday, September 12th, 2024
Stock markets this Thursday finished higher — off session highs (except for the Dow, which was right there) but steadily higher for the most part throughout the day. The Dow rose +235 points, +0.58%; the S&P 500 was +41, +0.75%; the Nasdaq +174 points, +1.00%; and the small-cap Russell 2000 +25, +1.22%.
This week’s inflation reports from the Consumer Price Index (CPI) and Producer Price Index (PPI) came and went without causing any drama toward what to expect from the Fed with rate cuts next week: they’re coming down. Perhaps there’s some disappointment that it won’t be a 50 basis point (bps) cut and instead will almost certainly be 25 bps, but we’re at last on the path to lower rates.
Expect the Fed to Discuss Labor Market
While the Fed’s historically high rates — 5.25-5.50% since July of last year — have managed to curb inflation a great deal, the issue now becomes whether we’re beginning to see erosion in the job market these days. You won’t notice it from today’s Weekly Jobless Claims, however, which once again stayed well behaved on an even keel at 230K claims for the week (off near-term highs of 250K) and longer-term claims in the 1.8 million range.
That said, monthly jobs numbers from the U.S. government (non-farm payrolls) and private-sector payrolls from ADP (ADP - Free Report) have come seriously down in their respective trailing three-month averages: to an average +116K non-farm jobs per month in the past three months from +211K in the prior three-month average, and +122 on ADP in the past three months, +188K averaged over the three months previous.
We expect the Fed will spend more time reflecting on the lack of job creation at such high interest levels, but expect them to lower rates incrementally. As we said early, 25 bps is now a virtual lock, but there will be Fed meetings in early November and mid-December, as well.
Earnings Roundup: ADBE, RH
Though we consider ourselves outside normal earnings season, we do occasionally see outliers reporting in between clusters. Before today’s open, we heard from supermarket major Kroger and furniture company Lovesac, and after the close we get Adobe Systems (ADBE - Free Report) and luxury furniture retailer RH (RH - Free Report) .
Zacks Rank #2 (Buy)-rated Adobe outpaced expectations on both top and bottom lines for its fiscal Q3 report. Earnings of $4.65 per share surpassed the $4.53 in the Zacks consensus, while revenues grew to $5.41 billion from $5.37 billion analysts were looking for. Its Digital Media group gained +11% year over year to $4 billion in the quarter. However, the revenue guide was light of current expectations and earnings were just in-line. Shares are down -9.3% on the news in late trading.
RH shares, on the other hand, are +20% following its Q2 results after the bell. The former Restoration Hardware missed on its bottom line — earnings of $1.45 per share versus the Zacks consensus $1.53 — but beat on the top: $830 million versus $826.9 million expected. Climbing demand, though, is promising a strong comeback for the luxury retailer: demand grew +10% in July and +12% in August, and is expected to be between +12-14% in Q3. Questions or comments about this article and/or author? Click here>>
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Markets Up for the Week (So Far) on Inflation and Jobs
Thursday, September 12th, 2024
Stock markets this Thursday finished higher — off session highs (except for the Dow, which was right there) but steadily higher for the most part throughout the day. The Dow rose +235 points, +0.58%; the S&P 500 was +41, +0.75%; the Nasdaq +174 points, +1.00%; and the small-cap Russell 2000 +25, +1.22%.
This week’s inflation reports from the Consumer Price Index (CPI) and Producer Price Index (PPI) came and went without causing any drama toward what to expect from the Fed with rate cuts next week: they’re coming down. Perhaps there’s some disappointment that it won’t be a 50 basis point (bps) cut and instead will almost certainly be 25 bps, but we’re at last on the path to lower rates.
Expect the Fed to Discuss Labor Market
While the Fed’s historically high rates — 5.25-5.50% since July of last year — have managed to curb inflation a great deal, the issue now becomes whether we’re beginning to see erosion in the job market these days. You won’t notice it from today’s Weekly Jobless Claims, however, which once again stayed well behaved on an even keel at 230K claims for the week (off near-term highs of 250K) and longer-term claims in the 1.8 million range.
That said, monthly jobs numbers from the U.S. government (non-farm payrolls) and private-sector payrolls from ADP (ADP - Free Report) have come seriously down in their respective trailing three-month averages: to an average +116K non-farm jobs per month in the past three months from +211K in the prior three-month average, and +122 on ADP in the past three months, +188K averaged over the three months previous.
We expect the Fed will spend more time reflecting on the lack of job creation at such high interest levels, but expect them to lower rates incrementally. As we said early, 25 bps is now a virtual lock, but there will be Fed meetings in early November and mid-December, as well.
Earnings Roundup: ADBE, RH
Though we consider ourselves outside normal earnings season, we do occasionally see outliers reporting in between clusters. Before today’s open, we heard from supermarket major Kroger and furniture company Lovesac, and after the close we get Adobe Systems (ADBE - Free Report) and luxury furniture retailer RH (RH - Free Report) .
Zacks Rank #2 (Buy)-rated Adobe outpaced expectations on both top and bottom lines for its fiscal Q3 report. Earnings of $4.65 per share surpassed the $4.53 in the Zacks consensus, while revenues grew to $5.41 billion from $5.37 billion analysts were looking for. Its Digital Media group gained +11% year over year to $4 billion in the quarter. However, the revenue guide was light of current expectations and earnings were just in-line. Shares are down -9.3% on the news in late trading.
RH shares, on the other hand, are +20% following its Q2 results after the bell. The former Restoration Hardware missed on its bottom line — earnings of $1.45 per share versus the Zacks consensus $1.53 — but beat on the top: $830 million versus $826.9 million expected. Climbing demand, though, is promising a strong comeback for the luxury retailer: demand grew +10% in July and +12% in August, and is expected to be between +12-14% in Q3.
Questions or comments about this article and/or author? Click here>>