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“Work takes on new meaning when you feel you are pointed in the right direction. Otherwise, it’s just a job, and life is too short for that.” – Tim Cook

Below is a snippet of commentary from today’s Morning Lineup. Start a two-week trial to Bespoke Premium to view the full report.  

An apple a day keeps the doctor away, and an Apple (AAPL) earnings report could be just what the market needs to get out of this week with a gain.  At current levels, the gains aren’t quite enough to push the market into the black for the week, but if there’s any positive momentum during the trading day (a bigger ask lately), we could get over the hump. Overnight, Asian markets were mixed as the yen rallied from its multi-decade lows earlier in the week.  Europe is firmly in positive territory with gains of around 0.50% as banks lead the rally even as Novo Nordisk falls around 5%. Ahead of the 8:30 jobs report, treasury yields are little changed, oil is slightly higher but still below $80, and gold is down fractionally.

Before the April employment report, we wanted to briefly summarize trends surrounding recent reports.  The table below summarizes the last two years’ worth of reports including how each came in relative to expectations along with equity market performance on the day of the report.  One thing that immediately stands out is that just three of the last 24 reports have come in weaker than expected, and the average margin of “beat” in these 24 reports was 76K. Before Covid, a beat of 76K was very strong.  Post-Covid, it’s a normal occurrence.

In terms of the market’s reaction to these reports, the last eight reports have been extremely positive with positive one-day reactions seven times.  Before that, things weren’t quite as strong. From May 2022 through April 2023, for example, the S&P 500 declined on the day of the report nine out of twelve times.  In terms of recent sector performance, two standouts have been Energy and Financials. Both sectors have reacted positively to 12 of the last 13 reports with average gains of 0.98% and 0.78%, respectively.  Consumer Discretionary and Industrials haven’t been slouches either as they notched gains on eleven of the last thirteen non-farm payrolls days.

Getting back to the pace of stronger-than-expected reports, it’s hard to believe but 21 of the last 24 reports have been better than expected.  As shown in the chart below, dating back to 2000, we’ve never seen this torrid pace of stronger-than-expected reports.  Can the Fed really be talking about rate cuts when the pace of stronger-than-expected reports is this strong?

While better than expected Non-Farm Payrolls reports have been occurring at a pace never seen before, another notable trend lately has been the pace at which reports have been revised lower.  When we compare the originally reported change in Non-Farm Payrolls to the current readings after revisions, just nine reports have been revised higher meaning that 15 have been revised lower. Looking back over time, this isn’t necessarily extreme, but it is above the historical average of 12.  In other words, Non-Farm Payrolls reports over the last few years have been blistering hot relative to expectations at their initial release, but unlike a fine wine, they haven’t been getting better with age.

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