Well, US stocks deep in the red, and this does come on the heels of a weaker than expected jobs report on-farm payrolls for July increasing by just 73,000 and the unemployment rate rising to 4.2%.
This does come on the heels of poor PC hotter than forecast and Q2 US GDP, which talked forecasts after contracting earlier in the year.
Well joining me on this.
Friday morning to weigh in is Steve Sosnik, chief strategist at Interactive Brokers.
Steve, great to have you here.
Well, we are looking at the major stock averages down at least 1.5%, and we are looking at the 10 year yields hovering right around the 4 quarter level.
So what did you make of the jobs report, in particular those revisions?
Good morning, Remy.
The key was Indeed, the revisions because we basically wiped out two months of what we thought was a healthy job market, and it does really sort of change the whole narrative around around what the Fed might do and around what the market's thinking because you know before we were thinking, OK, the labor market is all right, you know, unemployment rate 4.1, up to 4.2% is not going to not going to stress anybody out, but You know, one of the, with the dual mandate, it was OK for Powell to say, and I agreed with him to say that, you know, let's wait and see how tariffs go, and things aren't really as restrictive even though we're technically restrictive monetary policy.
It's not restricting anything.
Now all of a sudden the Labor part of the dual mandate just came into very deep question and the labor market is something that we've been keeping our eyes on, especially on the heels of the Fed meeting for July, as you mentioned, we're paying attention to Powell's comments.
So what does this mean for The set for the rest of 2025, the market has completely rejiggered its expectations about rate cuts coming before before this morning, I think there were around 40% chance of a rate cut for September and then call it another 35-40% chance for a second rate cut in December.
I just checked before we came on air.
It's about 87% chance now for September, and they're pricing in two cuts by the end of December, more than, you know, two cuts plus for December, and you can see this.
Look, you know, you mentioned the 10 year yield and the opener.
The 2 year yield is down about 20 basis points.
That tells you that the market has completely reassessed the likelihood of rate cuts over the coming over the coming months and well within the next 2 years, certainly, yeah, and Steve, it's been a big week for economic data as well.
We saw the first reading of QT GDP coming better than expected at 3%, but there's a lot happening under the surface and core PC coming hotter than expected.
So quickly, what did you make of that? made of it that this is a tricky situation because if we're talking about the dual mandate and inflation is a little hot, how, how quickly can the Fed afford to go and what you would expect to see there if the market really gets concerned about that is the the spread between the twos and the tens, the 2 year, 10 year spread widened.
Today it's about 8 basis points wider.
If you're really concerned that the Fed has to.
Start dealing with the labor market and turn its back a bit on inflation, that would be reflected in the steeper yield curve.
So that I think is one of the one of the key economic indicators to be watching.
Well, it's sort of a market indicator I'm telling you to read on the economy, but it just got a lot murkier this morning.
Thing of murky.
The weather outside is a bit murky and colder than normal, but here we are.
We got earnings out from some of the mag 7 names.
Should they be called the Fantastic Four instead?
That is kind of my thinking at this point, you know, when I looked at a year to date performance of the Mag 7, you have Nvidia, Meta, Microsoft knocking the cover off the ball.
They're doing phenomenally.
Alphabet's OK.
Amazon was OK until today.
Um, I would probably throw broadcom as the fourth of the Fantastic Four, but when you look, Tesla's down here today, Google's alphabet is kind of flattish, and Apple has been down year to date despite today's modest gain notwithstanding.
So yeah, I do think the leadership has changed and the narrower the leadership gets, the riskier the market gets and the more susceptible you are to air pockets kind of as as we're watching right now.
And finally, Steve, before I let you go, we have about 60 seconds here.
So August 1st we're paying attention to the implications of tariffs, and here we are, the goalpost keeps on moving for some countries.
So what are you expecting in the next week?
Well, we'll see, we'll see right now if there's any room for negotiation left because there's still a week till they're implemented, but I think the idea of that all the tariffs can be something that could be sort of semi ignored or they're going to be benign.
Well, that reality is biting right now and I think that we were already off to a bad start before the employment numbers and I think that's, you know.
That was the tell there that people are really having to reckon with this right now.
And very quickly we have about 30 seconds here right now.
The S&P 500 down about 100 points, but right now we are hovering right around 6233.
What levels are you paying attention to?
I'd, I'd start to see when the moving averages come into play again.
10 day moving average.
30 day moving average 50 day moving average.
I don't have them off the top of my head, but those would be those would be the things because I, you know, we've seen relentless buying on the dip come in and we haven't seen it this morning, which in itself is a tell about traders' risk tolerance today.
Well, Steve, thank you so much for joining me as we kick off a new trading month, and I appreciate all of your insights.
