On New York morning trade. We are set for a rally on Wall Street. And this does come on the heels of the latest employment report. Now, Fed fund futures only show a 17% chance for an October rate hike. Meanwhile, this comes as a deepening split lurks underneath the market's surface. While the S&P 500 hovers less than 2% from record highs on the back of the AI boom as of close yesterday, ten year Treasury yields did hit a 24 year high earlier this week.
Now, the equal weight S&P 500 is eyeing a seventh consecutive weekly loss as of yesterday. But we are looking at higher open for futures this morning. Well joining me this morning to weigh in on the jobs report as well as the fed outlook is Eric Criscuolo who's market strategist for the New York Stock Exchange.
Eric good morning. Happy Friday.
Same to you Remy. Thank you.
Well here we are. Q4 is finally underway. And we finally got that jobs report as well as the PC figures earlier this week. So we are looking at expectations for an October rate hike come closer to that 17% level. But what do you make of the fed rate outlook? As we move forward, and what are the implications of this jobs report?
Yeah. So starting with the jobs report, it was it was a lot cooler than thought. Um, than the expectation was but still showed that jobs, um, that there were job gains overall. Um, the prior months were revised lower. I think July was actually revised to a negative number. Um, that kind of shows also just how how volatile these measures have been for a while now.
Um, so again, you know, it's hard to say. You really don't want to put too much into one print. That's what we say a lot. Um, but it's true. But and this was a print that actually was kind of good for equities. You know, there was not a collapse in the jobs market. It's cooling. Um, yields came down. Rates came down right after the print.
Um, we indexed the the S&P futures jumped higher on the print. So it's kind of exactly what the what the market wanted. Um, and, you know, it still showed that the economy is expanding jobs. Job gains are. They're just not as hot as they were maybe a year ago. And that's exactly kind of what we wanted to see, or at least the fed wanted to see going forward.
Yeah. And if we look at futures prices as we head into the market open here in New York, we're looking at gains of at least 1% for the Dow, Nasdaq and S&P 500. But when we take a closer look at what's happening with the economy, we have been monitoring oil prices as well as inflation. And I do want to get your take on this move we've been seeing in Treasury yields, not just here in the US but also around the globe.
Yeah, it's been a global phenomenon. And you're actually starting to hear from the European Central Bank and the monetary officials. They're starting to talk about yield spreads. Right. German bunds versus particularly the French yields. So those are really starting to widen out. They haven't talked about that for a while.
It's not they're not they're not screaming about it. But they're some of the officials are starting to talk more and more about it. Um, you know that usually is indicates that someone there is thinking about internal stresses, right? When those spreads are widening out, some type of stress is happening.
Generally speaking, there's not a panic yet at all. Um, but it's definitely a global phenomenon. And it's the the rate move has been weighing on stocks overall. Um, even though the S&P 500, the headline number has kind of held in there, it's actually, you know, up a little bit as rates have moved higher.
Um, strongly a lot higher. But the average stock in the S&P 500, right. If you look at the equal weight S&P 500 that's actually pulled back, um, you know, depending on your time frame, maybe like 5% over, over the quarter. So the average stock is kind of starting to feel the pressure of these higher rates, even though the headline S&P 500 that's kind of held up largely because of the mega caps, the tech names, the AI trade.
Yeah. And I'm so glad you mentioned that because in pre-market trade we are looking at S&P 500 futures higher by at least 1%. But we are seeing that breadth divergence when it comes to the equal weight for the S&P 500. And when we look ahead to the final months of this year, we have to keep in mind that there's seasonality at play as well as geopolitics as well as politics.
So what sectors are you keeping your eyes on especially as we head into earnings season?
Yeah, it's a great point. So September we've said it a thousand times the weakest month of the year historically. Um, for Q uh, some of the strongest numbers historically for, for stocks. So we're going into a season. We're going from a seasonally weak part of the calendar to a seasonally strong part of the calendar.
Um, depending on how you look at, you know, numbers, uh, performance in pre-term. Sorry, in midterm years. Um, you know, generally speaking, things are fine. Uh, so we shouldn't really see too much of a headwind because of it's a midterm election season, but definitely geopolitics and politics coming into the fray.
Um, you know, the AI trade is so important to the market, not just for tech stocks, right? Obviously that's that's that's obvious, but. It filters into so many other sectors. It filters into construction. It filters into energy. The utilities right there getting the power to build. You know that these data centers need filters into financials, right.
The the credit being provided to these companies to build all this stuff is coming from the banks and, and the, you know, private credit names. So it's just you have to concentrate, you have to focus on AI, but you also have to pay attention to, you know, the staple stocks, right? The consumer stocks, the things that are in grocery stores.
Because while this print might be good for inflation, you know, we'll see. It's still high. It's still above target. The fed still has work to do. Uh, lower income consumers are still under pressure. You still hear that throughout earnings calls. So, um, you know, watching how those names react is definitely going to be something that's important as well as we have for earnings season coming up or um, So unfortunately three key earnings season coming up again.
So
that focus is going to turn back to the commentary right. The numbers sure. But especially what the CEOs and the CFOs are saying about what they are seeing and how trends have shifted, you know, from August, September into October and November.
And finally, Eric, before I let you go, of course, we're counting down to the next CPI print now that we've had PCE as well as the jobs report, because we are looking ahead to the rest of the year when it comes to the Federal Reserve in terms of the October and the December meetings. But we have been hearing from fed speakers out there, and I'm sure a lot of American viewers are wondering how to interpret a lot of these signals, especially given where prices are and what we're seeing in terms of elevated inflation.
So what would you say to consumers out there?
Yeah, I mean, I mean, the fed officials are going to go out and they're going to talk and, you know, they're going to try and be they will say what they feel, but they'll also try to not be too, too bombastic or really, you know, trigger anything much different than they've been saying. There's been a slight shift in what the fed officials have been talking about.
Um, but, you know, basically you can't worry about what they say if you're just an average consumer. Uh, you know, generally speaking, the economy is doing well. Generally speaking, employment is holding up. Generally speaking, uh, stocks are reacting relatively well, but we're in this range that we've been in for a while.
Um, the question is how do we break out of it to the upside, or do we have to see a meaningful pullback to the downside to kind of flush out and restart some of the things to eventually move higher again?
Well, Eric, great to have you here. It does appear as though the New York Giants are set to ring. The opening bell are on the floor. So that's why I hear this clapping as well as futures set to open higher. So thank you so much for joining us today. Thank you.
