Friday, May 7, 2021

Morning Note: It's a "Taker's" Market -- And -- The cost of short-term thinking...

Well, hmm... that didn't go well!

I'm referring to this morning's jobs report. The expectation was for north of 1 million jobs "taken" (typically, the term is "created", but we have a huge number of openings and, thus, eager employers, so I'll call it a "taker's" market right here). The actual number came in at 266k...

Additional evidence supporting my "taker's market" quip comes from the report's internals: Average hourly earnings jumped .7% month-over-month (notably above the estimate) and average hours worked rose as well. Combine the two and you get better than a 1% month-over-month rise in wages, something we haven't seen in years (inflationary??)...

Looking at the global data coming in overnight and you'd think the world is ablaze with activity. Nippon steel reported earnings literally 4 times expectations, to name just one data point. I.e., there's a ton of spending going on out there!

So, while bonds (yields initially plunging) and tech stocks are loving it (banks hating it [yields plunging]) this morning, I'm thinking they're getting their proverbial carts ahead of their proverbial horses just a bit.

You see, ADP released their jobs report on Wednesday and it came in at +742k, so that's a head scratcher. And, digging into this morning's number (well, borrowing from Peter Boockvar's digging), the selective shutdowns of auto factories (due to lack of semiconductors), temporary jobs plunging 111k, and the construction trade coming in with zero net new hiring  -- as lumber, and apparently workers, are hard to come by, at least with reasonable price tags -- explains some (but not enough) of this morning's surprise...

And, lastly, I'll leave you to draw your own conclusions from this tidbit:

Asian equities leaned green overnight, with 10 of the 16 markets we track closing higher.

Europe's in rally mode this morning, with all but 3 of the 19 bourses we follow trading up so far.

U.S. major averages are green across the board: Dow up 75 points (0.23%), SP500 up 0.49%, SP500 Equal Weight up 0.40%, Nasdaq 100 up 0.97%, Nasdaq Comp up 0.94%, Russell 2000 up 0.70%.

The VIX (SP500 implied volatility) is down 2.39. VXN (Nasdaq 100 i.v.) is down 2.82%.

Oil futures are up 0.42%, gold's up 1.13%, silver's up 0.37%, copper futures are up 2.55% and the ag complex is up 0.16%.

The 10-year treasury is up (yield down) and the dollar is down a big 0.44%.

Led by solar stocks, ALB (lithium), gold miners, uranium miners and base metals futures -- but dragged by banks, Verizon, oil services, metals miners and financials -- our core portfolio is up 0.47% to start the day.

While Euan Sinclair's, Positional Options Trading is, per the title, about the advanced use of options within portfolios, in it he offers up some basic, yet essential, market wisdom as well:
"Short-term thinking: This thinking shows the irrational preference for short-term gains at the expense of long-term performance."

"...investors underreact, but they also overreact. Between these two biases you should be able to explain almost any market phenomena."

Have a great day!

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