Although the US recorded two consecutive quarters of negative GDP growth, which is the definition of a technical recession. In the US, it's the NBER that can officially announce a recession. It defines it as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators." This is why job data is particularly important at the moment.
This time, as often on Wall Street, good news is bad news. The economy added more jobs than expected, and investors worry that the Fed could raise rates more aggressively than expected in September to prevent an overheating of the economy and lower prices.
The 2-year and the 10-year US bond jumped after the data was published, while all three Wall Street indexes tumbled. The Nasdaq was down 1.45% at 9am, the S&P 500 lost 1.0% and the Dow Jones 0.6%.
The US added 528,000 jobs in July, while the jobless rate dropped to 3.5%. A Reuters consensus expected nonfarm payrolls to rise by 250,000 jobs, which is much lower than today's data. Estimates ranged from as low as 75,000 to as high 325,000.
The labor market is one of the major factors in US central bank policy. Given the risks posed by the wage-price spiral (rising prices lead to rising wages, which lead to rising prices, etc.), the Fed is watching the data very closely. To put things in perspective, wages were up 5.1% year-over-year in the U.S. in June, while inflation was at 9.1%. Data published today shows wage growth also progressed, as average hourly earnings jumped 0.5% for the month and 5.2% from a year ago, which is higher than estimates.
In other news, India raised its policy rate by half a point this morning, as did the Bank of Brazil and the Bank of England before it this week. The Indian policy rate is now 5.4% for an annual inflation of 7% in June. All central banks are caught up in the inflationary spillover. In the U.K., the BOE expects prices to rise by 13% year-on-year by the end of the year.
In Asia, Nancy Pelosi continues her visit to South Korea and Japan. Her visit to Taiwan has caused a stir in Beijing, which has responded with aggressive military exercises and retaliatory measures on imports and exports, but nothing more at the moment. Chinese-American relations are cooling, but it is clear that financial markets do not care right now, since they are focused on the Fed and its next rate hike.
Economic highlights of the day:
The dollar is up to EUR 0.9846. Gold is down to USD 1768. Oil remains under pressure despite a slight recovery overnight, with North Sea Brent at USD 93.43 per barrel and US WTI light crude at USD 87.65. The yield on 10-year U.S. debt is down slightly at 2.68%. Bitcoin is trading around USD 23,100.
* Tesla shareholders voted Thursday to accept the board's recommendations on most proposals at the annual meeting, including the re-election of directors and a three-for-one stock split, but rejected proposals focused on the environment and governance.
* Warner Bros. Discovery reported a second-quarter net loss of $3.4 billion and a slight decline in revenue and outlined a new strategy to merge the HBO Max streaming service with Discovery+. The stock was down 9.5% in pre-market trading.
* Amazon will acquire IRobot for about $1.7 billion, the autonomous vacuum cleaner maker announced Friday, which was up 19.5% in premarket trading.
* Lyft - The chauffeured transportation vehicle group expects adjusted operating profit of $1 billion for 2024, betting on a rebound in demand after reporting record second-quarter profit.
* Amgen reported quarterly sales of $6.59 billion on Thursday night, slightly ahead of consensus, and confirmed its full-year adjusted profit forecast.
* Western Digital on Friday posted lower quarterly revenue and said it expects first-quarter revenue of $3.6 billion to $3.8 billion, below estimates provided by Refinitiv. The stock was down 6.3% in premarket trading.
* Doordash on Thursday raised its annual gross order value target as the meal delivery group does not expect demand to slow despite inflation.
* Beyond Meat - The food group specializing in meat substitutes based on plant proteins lowered its annual sales target on Thursday and announced job cuts due to the impact of inflation. The stock was losing 1.1% in pre-market trading.
* Twitter called Elon Musk's allegations "implausible and contrary to the facts" when he said in a document filed with a Delaware court that he was misled into signing the deal to buy the social network.
* AMC Entertainment Holdings announced Thursday that it would pay a special dividend in the form of preferred stock after posting a larger-than-expected second-quarter loss. The stock was down 9% in pre-market trading.
* Virgin Galactic, which specializes in space tourism, announced that it has once again postponed its first commercial flights from the first quarter to the second quarter of 2023. The stock fell 12.3% in pre-market trading.
* Visa and Mastercard said Thursday they have suspended ties with the advertising arm of MindGeek, owner of the Pornhub website, after U.S. courts raised questions about whether the payment card specialists may have facilitated child pornography.
* Alphabet subsidiary Google has been asked by Nigeria to block the use of YouTube and live broadcasts by banned groups and terrorist organizations in the country, the Nigerian information minister said Thursday.
* Apple has asked suppliers to ensure that shipments from Taiwan to China comply with the latter's customs regulations to prevent them from being inspected, according to a report published by Nikkei on Friday.
- Atlas Air Worldwide Holdings: Susquehanna Financial downgrades to neutral from positive. PT up 2.8% to $102.50.
- Ball: Atlantic Equities LLP cut the recommendation to neutral from overweight. PT set to $58.
- BeiGene: ICBC Research reinstated coverage with a recommendation of buy. PT up 36% to $260.10.
- Bio-Techne: Stifel cut the target cut the target to $500 from $560. Maintains buy rating.
- Celanese: Piper Sandler cut the target to $120 from $145. Maintains underweight rating.
- ConvaTec: Bank of America downgrades to neutral from buy.
- Dunelm Group: Stifel initiated coverage with a recommendation of sell. PT down 18% to 700 pence.
- Eli Lilly: Cantor Fitzgerald maintains overweight rating. PT up 18% to $360.
- Epam Systems: Cowen raised the target to $440 from $400. Maintains outperform rating.
- Hikma Pharmaceuticals: Barclays downgrades to equal-weight from overweight. PT up 6% to 1.750 pence.
- Kellogg: Piper Sandler raised the recommendation to neutral from underweight. PT set to $74.
- KLA: Cowen cut the target to $55 from $68. Maintains market perform rating.
- Paramount Global: J.P. Morgan cut the recommendation to underweight from neutral. PT set to $25.
- Next: Goldman Sachs reduces to neutral from buy. PT up 13% to 7.600 pence.
- Unite Group: Stifel cut the recommendation to hold from buy. PT set to 1.170 pence.
- Yeti Holdings: Piper Sandler maintains overweight rating. PT down to $76.