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“A state of war is not a blank check for the president when it comes to the rights of the nation’s citizens.” – Sandra Day O’Connor

Morning stock market summary

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There was little conviction in equity futures heading into the June jobs report this morning. Overnight, Asian stocks were lower as they caught up to the declines from the US yesterday while European stocks attempt to bounce from yesterday’s sell-off.  Industrial Production in Germany was weaker than expected falling 0.2% m/m versus expectations for no change, but commentary from ECB officials including de Guindos and Lagarde both implied that more rate hikes are in the cards.

Today’s Non-Farm Payrolls (NFP) report missed expectations by 21K while the Unemployment Rate declined to 3.6% which was right in line with expectations.  Average hourly earnings and average weekly hours both came in better than expected, though.  As far as revisions go, prior readings were revised lower by over 100K with May’s originally reported level of 339K revised down to 306K.  Futures have seen a modest bounce while treasury yields are lower.

The streak is over! With today’s weaker-than-expected report, the record run of better-than-expected NFP reports ended at 14 and came just one month shy of tripling the prior record of five straight better-than-expected reports.  It only figures that the streak ended on the same month that the ADP Private Payrolls report crushed estimates and caused just about every investor out there to price in a better-than-expected report as a sure thing.  If you’re keeping track, the last three times now that ADP surpassed forecasts by 300K or more, the corresponding NFP report for the same month missed forecasts.  On 6/3/21, ADP topped forecasts by 328K, and on the next day, NFP missed forecasts by 116K.  On 1/5/22, ADP topped forecasts by 397K, and two days later NFP missed by 251K.  Now, this week ADP tops forecasts by 372K, and NFP missed by 21K.  Relying on the ADP report as an indicator for the NFP report? What is it they say about insanity and doing the same thing over and over again?

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