Wall Street Breakfast
Jobs in spotlight this holiday week
Nonfarm payrolls are expected to rise by 200,000. (0:17) Why Apple may be the place to be. (3:12) Wall Street myth busting. (6:40)
Show Notes
Who Doesn't Feel Comfortable Owning Apple? Nvidia's Upside Volatility.
Earnings Calendar
Dividend Roundup
Episode transcripts: seekingalpha.com/wsb
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- Duration:
- 8m
- Broadcast on:
- 30 Jun 2024
- Audio Format:
- mp3
[INTRO MUSIC] Welcome to Seeking Alpha's Wall Street brunch, our Sunday look ahead to this week's market moving events, along with the weekends, top news and analysis. Hello, today is Sunday, June 30th, and I'm your host, Kim Ka. Independence Day will mean low volume and largely quiet week for Wall Street, but there will be some fireworks on Friday, as well as Thursday for fed nerds like me. Well, I'm not watching fellow colonials New Zealand take on England and Cricket with a great commentary of Frankie Mackay. The stock and bond markets will close early on Wednesday, July 3rd, and be closed July 4th, but Friday, July 5th brings the June employment report. The consensus is for payroll growth to drop to 200,000 in June, down from 270,000 in May, with the unemployment rate sticking at 4%. Average early earnings growth is expected to taper to up 0.3% on the month. Because of the holiday, we get Joltz and ADP a little earlier on Tuesday and Wednesday. Bank of America says the US labor market is gently cooling as Americans continue to see jobs as broadly easy to get, while the recent spike in young adult unemployment has shown signs of subsigning. Seth Carpenter, global economist at Morgan Stanley, says one unusual aspect of this cycle is the fact that we have witnessed a downward trend in non-farm payrolls lasting over two years. He added, "I often hear clients fret that when the labor market softens it will slump, but so far that has not been the case. We have had two years of slowing, but not slump. The surge in labor supply from immigration has afforded even a bit more slack. We think the job creation is likely to slow, but stay positive." While the unemployment rate has already risen from its lows to 4%, we expected to keep climbing heading towards 4.5% in our forecasts. In other cycles, investors would think a 0.5 to 1 percentage point rise in unemployment spelled doom, but 4.5% unemployment is still a far cry from a hard landing. Still, that rise in the jobless rate could bring the some-rule recession indicator into play. That has triggered when the three-month-being average of the national unemployment rate rises by half a percentage point or more relative to its lows during the previous 12 months. Returning to stocks, reviewing the first half of the year, it's been a boon for equity investors, but there were some concerns at the end about breadth. Still, the S&P 500 notched an all-time intraday high of 5523.64 points and a record closing high of 5487.05. The index posted 32 all-time intraday highs in the first half of 2024, making it the sixth highest number for any first half since 1928. The S&P hit 5,000 points for the first time ever on February 8th. It then took out the 5,150-100 levels in quick succession. Following a brief respite, the S&P scaled 5,300 in May and 5,400 in June. It surpassed 5,500 last Thursday. February was the best month, with the benchmark index up 5.17%. April was the cruelest month for bulls at least, falling 4.16%. That was the only month that stocks ended in the red. What's up next for stocks? Alex King, who had Seeking Alpha's Growth Investor Pro service, spoke to Armina Sherville. Can construct a scenario technically and fundamentally where the market is going to go up for the next 10 years? I mean, it's possible to construct that argument, and that might happen, and that's not a very useful plan. So let's say that we're in the later stages of this bull phase, which I suspect we probably are. And if you sit back and think about, well, what's likely to happen next? I think what's going to happen next is you're going to see some late money arrive. Again, long money should have been in tech 18 to 24 months ago. If it wasn't, you have to actually sell what it was going to come in now. And this is both institutional and advised money and individual retail money. Where is it going to go? The minute rate cuts start, and I'm assuming they do, then I think a whole lot of money is going to come out of money market funds as you start to get lower rates on your cash. People start to think about, well, I've noticed markets going up, my cash rates are coming down. I think I'll get back in the market. And I think that alone tells you we're probably in the later stages of this current bull phase. And again, I can argue against that, but just as a cautious plan, let's say that's true. Where's the money going to go? My own view is the first place it's going to go is Apple. That's not a very exciting idea. It's not an undercover stock. It's not a microcap that's going to explode 10x tomorrow. It's not, you know, Nvidia, it's not any of those things. But for that reason, pretty bullish on Apple. I own the stock personally, technically, if you look at the chart for Apple, again, it's been under institutional accumulation for some time, I think. And I think that's because if you were a large account player whose job it is to sort of walk a little bit ahead of everyone else and see what's going on, you could have seen Apple's engagement with AI and late entry into AI, but probably very effective entry because, as is, you're afraid of you, by everybody now, it could be the on-ramp for most people onto AI services. I'll put a link to that full interview at the top of show notes. The earnings calendar is really light given the holiday. On Tuesday, MSC Industrial, Polestar Automotive, and Simulations Plus reports, Constellation Brands ways in on Wednesday. In the news this weekend, Microsoft said that it has been telling customers that emails exchanged by them have been accessed by the Russian state-sponsored hacking group Midnight Blizzard. The company did not specify how many customers were affected or identify them, but said they are in the middle of an ongoing investigation after first disclosing the hack in January. Microsoft told Seeking Alpha, "Our investigation continues. We have been reaching out to customers to notify them if they had corresponded with a Microsoft corporate email account that was accessed. We will continue to coordinate, support, and assist our customers in taking mitigating measures. We have found no evidence that any Microsoft hosted customer-facing systems have been compromised." Bloomberg said some of those customers were more than a dozen state agencies and public universities in Texas. The agencies included the Texas Department of Transportation, the Texas Workforce Commission, Texas Department of Motor Vehicles, the Texas General Land Office, and the Texas State Securities Board. For income investors, CubeSmart goes ex-dividend on Monday while Progressive goes ex-dividend on Wednesday. On Friday, Cisco goes ex-dividend with a payout date of July 24th, and GP Morgan goes ex-dividend with a July 31st payout date. And in the Wall Street Research Corner, the quant team of B of A securities is out to bust a few Wall Street myths. False. Buyback's drive performance. The relationship between SMB500 buybacks and index performance since 1986 is near 0R squared. They also found that B of A corporate client buybacks appear to have little effect on index performance, saying, "What we can validate is that companies that repurchase shares at inexpensive valuations tend to outperform. Over the past 12 months through April, cheap buybacks outperformed expensive buybacks by 12.5 percentage points." False. Retail investors are a contrary indicator. Equity client flows suggest returns following periods of retail inflows have been above average and returns post-retail selling have been below average, with similar spread for hedge funds. B of A's low institutional ownership factor, which includes high retail ownership of stocks, has more consistently outperformed during market drops. And false. During periods of wage disinflation, labor intensive companies outperform. They say, "Investors shouldn't own labor intensive companies under almost any circumstances. Companies with the highest ratio of number of employees per dollar of sales have been almost constant laggards relative to their labor-like counterparts." That's all for today's Wall Street brunch. Look for links to stories in the show-net section. Don't forget these episodes will be up with transcriptions at SeekingAlpha.com/WSB. And join the elite community of real investors to an Earth-great investing ideas. head to SeekingAlpha.com/subscriptions. a.m. . [MUSIC PLAYING]