JOLTS, Trouble in the Bond Market

Good morning contrarians! Welcome to the Daily Contrarian, our morning look at events likely to move markets in the day ahead. Today is Tuesday, Oct. 3. The Bottom Line segment of the podcast starts at (4:10) for those who wish to skip ahead.

State of Play

Stocks treaded water yesterday. The bigger movement was in bonds, which sold off across the board. The likely catalyst was comments from Fed officials about “higher for longer,” though there may also be fiscal concerns playing in to this. As of 0645 it looks like things are set to move lower:

• Stock index futures are flat. Only the Russell 2000 which tracks small caps is moving at all from the break-even point, down 0.3%;

• Bonds are resuming their drop, with the 10-year yield up 2 basis points to 4.71%, its highest level since 2007. The 2-year is unchanged at 5.12% (yields move inversely to prices);

• Cryptos have started to give back some gains, with Bitcoin down 2.5% to trade around $27,600;

• Commodities are unchanged after selling off yesterday. WTI crude oil is trading around $88.50/barrel.

Known Events

We have a Fed speaker up first, at 0800: Atlanta Fed President Raphael Bostic participates in moderated conversation on “Economic Outlook for 2024: Inflation, Rising Interest Rates, Labor Market, and Uncertainties” that is part of the Leadership Atlanta alumni roundtable. Keep in mind that Bostic is just an alternate FOMC member this year. That and he also enjoys shooting his mouth off a great deal.

The Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. Economists expect 8.83 million openings, effectively the same as last month. Just as closely watched are the so-called quits levels, which track people voluntarily leaving the labor force each month. Last month 3.55 million ‘job quits’ were reported, corresponding to 2.3% of the labor force, which is the lowest it’s been in awhile. Leisure and hospitality saw a disproportionately big drop. These are indications of a softening labor market. So too is the Barron’s cover discussed yesterday.

Earnings: McCormick (MCK 0.00%↑) just reported results that fell a bit short of estimates. After the close at 1600 we’ll hear from Cal-Maine Foods (CALM 0.00%↑).