What's Happening To Bonds Is Terrifying

Plus - Sell The News Incoming?

The markets were eagerly anticipating the October jobs update, but there were some mixed signals and caveats. On the surface, the addition of just 12,000 jobs is very weak, but it also was impacted by two hurricanes, the Boeing strike and the brief strike by port workers. That also stands in contrast to the ADP jobs number, which showed growth of 233,000 jobs last month. The 12,000 in isolation looks like a big disappointment, but I think there are enough extenuating circumstances here to say that it’s probably not quite as bad as the number suggests. The fact that both the August and September non-farm payroll numbers were revised downward, however, suggests that the October report probably would have come in below estimates either way. Overall, this could be considered a weakening in the labor market, but let’s wait until November’s report a month from now to see how much snapback there is if these situations resolve themselves. This likely also locks in a quarter-point rate cut at next week’s Fed meeting.

From the equity market’s standpoint, the focus was on tech earnings. As we expected, market volatility ticked up modestly, but there were no real misses among the magnificent 7 names that reported. Apple and Microsoft may have delivered the weakest results/guidance, but four of the five reporters - Apple, Microsoft, Alphabet and Facebook - were down roughly 5% from their peaks this past week. There was probably some air to be let out of the AI bubble either way, but these companies did present various obstacles they’ve run into as they ramp up their cloud businesses to meet demand. The sprint to AI market domination was never going to be a straight line and we have seen a few concerning trends. Still, the AI boom is progressing well and the modest pullback in the mag 7 names was probably justified given the overall results.