Morning Notes — Two Catalysts Ahead

Catalysts ahead include tomorrow’s Jobs Report and next Thursday’s CPI print. Markets are in a ‘bad news is good’ phase with today’s weaker labor data helping to calm markets ahead of tomorrow’s official BLS Jobs Report.  Weekly jobless claims came in higher and today’s September Challenger layoff report spiked ~46% MoM with hiring intentions falling to its lowest level since 2011.

Preview: With markets focused on inflation, a slightly lower payroll gain tomorrow would be considered equity-friendly. Consensus is looking for payroll adds of +250,000 vs. +315,000 last month and an unchanged 3.7% Unemployment Rate. Monthly wage gains will be of greater importance with the street looking for +0.4% MoM vs. +0.3% in August and a lower number obviously preferred. The participation rate will also be closely followed with another increase from 62.4% considered positive. The high-frequency data has recently pointed to an easing in tight labor markets, but the Fed takes still its cues from the official BLS report.

SPX: The momentum divergence witnessed Monday increased our conviction that a Q4 rally from deeply oversold levels is now underway. The technical buy signals need to be confirmed with improved macro fundamentals. Tomorrow’s Jobs Report is an important catalyst ahead followed by next Thursday’s CPI report and Friday’s start of CQ3 earnings season.