Jobs report will be most important market event next week, says Vital Knowledge's Adam Crisafulli

Key Concepts:

• Jobs Report (September): A crucial economic indicator for the week.
• ISM (Manufacturing and Services): Provides early insights into September's economic activity, unaffected by the shutdown.
• ADP Employment Report: A private sector employment survey, gaining importance due to uncertainty around government statistics.
• Section 232 Investigations/Tariffs: Trade policy tools used by the White House, potentially facing legal challenges.
• Energy Sector: Outperforming sector in the S&P, influenced by geopolitics and shifts in rhetoric.
• JOLTS Survey (Job Openings): Influences expectations for Fed rate cuts.
• Federal Reserve (The Fed): Central bank whose monetary policy decisions (rate cuts) are heavily influenced by economic data.

1. Upcoming Economic Data and Earnings Reports

• The week's key events include ISM reports, earnings reports from companies like Carnival (Monday) and Nike (Tuesday), and the September jobs report (Friday).
• The ISM reports will provide an initial look at September's economic performance, unaffected by the government shutdown.
• The jobs report is considered the most important event of the week, assuming it is released.

2. The Increasing Importance of ADP Report

• Due to uncertainty surrounding government statistics, the ADP employment report is gaining importance as an alternative source of information on the private employment landscape.
• The ADP report, scheduled for Wednesday, will be critical.

3. Trade Policy and Section 232 Tariffs

• The White House is pursuing a strategy of announcing more Section 232 investigations and tariffs to strengthen its trade agenda legally.
• This strategy is driven by the expectation that the Supreme Court might challenge the legality of existing tariffs, shifting the focus to Section 232 tariffs.
• The recent pharmaceutical tariffs did not have a significant market impact, with some relief noted in the details.
• The potential removal of tariffs could impact Treasury revenues, potentially leading to increased Treasury issuance and upward pressure on yields, which would be closely monitored by the stock market.

4. Energy Sector Performance and Geopolitical Factors

• The energy sector was the best-performing sector in the S&P this week, driven by higher crude oil prices.
• This performance is linked to a shift in President Trump's tone and rhetoric towards Russia and the war in Ukraine.
• Reports of the White House considering providing longer-range missiles to Ukraine, capable of striking Russia, contribute to upside risk in oil prices.
• Significant copper news also contributed to upward pressure on commodity prices, impacting the inflation outlook.

5. JOLTS Survey and Fed Rate Cut Expectations

• Higher-than-expected job openings in the JOLTS survey could raise doubts about the Federal Reserve's anticipated rate cuts.
• Strong economic data, such as weekly claims and upward revisions to Q2 GDP, have already led investors to question the Fed's aggressiveness in cutting rates.
• A strong JOLTS number or jobs report could prompt the Fed to skip a rate cut in October or suggest a pause in December, leading to an extended holding pattern.
• "So if we do get a JOLTS number, we get a hot jobs number on Friday. You know, the fed could easily skip October or cut in October and suggest they're not going to move in December and kind of go on an extended holding pattern."

6. Conclusion

The market's direction next week will be heavily influenced by economic data releases, particularly the jobs report and ISM surveys. The ADP report is gaining importance as an alternative data source. Trade policy developments, especially regarding Section 232 tariffs, and geopolitical factors impacting the energy sector will also play a role. The JOLTS survey and jobs data will be crucial in shaping expectations for Federal Reserve rate cuts, with strong data potentially leading to a less aggressive easing cycle.