The S&P 500 (SPX) continues to work through a seasonably bearish month. Visible risks, including a China slowdown, Washington issues and negative earnings preannouncements (bottleneck pressures), have lined up with technical sell signals at the end of August.
The S&P 500 has been holding up relatively well in the only historically bearish month of the year after price trend deceleration in late August signaled moderate downside. At the moment, the SPX is down ~4.7% from it’s 9/2 peak, which remains inline with other
Cyclical/value sector leadership still depends on bond yields moving higher. US Treasury yields hammered out cycle lows in late-July/early-August with the 10-year yields making a double bottom after failing to break through pattern support at ~1.12%.
The August Jobs Report capped off a series of mostly disappointing data including decent-sized downticks in August consumer confidence readings and a retail sales miss.
The summer slump in growth data was largely attributed to delta variant concerns, but the outbreak has recently shown signs of peaking and looks likely to now trace past Covid waves.
August US PMI and ISM data confirmed the expanding business cycle, which helped small cap stocks (RTY Index) outperform during the last two weeks. However, value sector leadership will have to start with outperformance in Financials that require higher bond yields and more curve steepening.
Today’s payroll miss fits with the trend from the past 2-3 weeks. US and global economic data has clearly pointed to some deceleration at the start of H2’22. The two recent reports on US consumer sentiment have disappointed vs. expectations and US high-frequency data (mostly
The significance of tomorrow’s payroll number hasn’t diminished, but expectations are lower than they were two weeks ago, which skews bond yield risk to the upside on a larger print.
The ADP private payroll survey isn’t always an accurate predictor of monthly non-farm payrolls, but today’s miss clearly lowers the bar for Friday.
Light attendance and a relatively light catalyst calendar over the past two weeks have mostly led to trend continuation, but the sleepy dynamic ends with Friday’s release of August payrolls.
