September 5th Market Overview

Happy Friday

Yesterday I mentioned construction quits dropped to 0.9%, the lowest since 2008. Today's jobs report confirms what that data was signaling.

August payrolls added just 22,000 versus 75,000 expected. Unemployment rose to 4.3%. June was revised negative for the first time since December 2020.

When workers stop quitting, it usually means they can't find better opportunities… thats the leading indicator.

Markets opened at fresh records on rate cut hopes then pulled back. Fed cuts now look certain for September with some pricing a half-point move.

Let's dig in...

Today's Big Picture

Jobs Report Tanks, Fed Pivot Locks In 
August payrolls added 22,000 jobs versus 75,000 expected. Unemployment rose to 4.3%. June was revised to show job losses for the first time since December 2020. Federal employment fell 15,000 as workforce reduction accelerates. Markets price 100% odds of September rate cut with 12% chance of half-point move.

Broadcom Breaks Out on AI Infrastructure Shift Broadcom 
$AVGO ( ▲ 9.78% ) beat quarterly estimates and will co-design chips for OpenAI. AI revenue jumped 63%. Nvidia and AMD declined as investors weighed competitive shifts in AI chip supply.

Policy Shifts Hit Sectors Hard 
Airlines rallied after reports Trump administration will cancel passenger compensation rules for delays. Lululemon $LULU ( ▼ 18.26% ) fell after warning tariffs and de minimis elimination will hit profits by $240 million.

Market Overview

U.S. Stock Indexes

Stock Spotlight

Broadcom $AVGO ( ▲ 9.78% ) 
beat revenue and guidance estimates and announced it will co-design chips for OpenAI.

Lululemon $LULU ( ▼ 18.26% ) 
cut full-year guidance. The company expects tariffs and de minimis elimination to hit profits by $240 million.

Tesla $TSLA ( ▲ 3.59% ) 
gained after the board proposed a new compensation package for Elon Musk tied to growth targets.

Big Name Updates

American Airlines $AAL ( ▲ 1.71% ) 
rallied with other carriers after reports the administration will eliminate passenger compensation requirements for delays and cancellations.

Alphabet $GOOGL ( ▲ 0.87% ) 
received a $3.5 billion EU fine for advertising technology abuses.

American Express $AXP ( ▼ 1.32% ) 
received a price target raise to $375 from Wells Fargo citing the pending platinum card refresh.

JPMorgan $JPM ( ▼ 3.11% ) 
declined with other banks on slower economic growth concerns.

Other Notable Company News

DocuSign $DOCU ( ▲ 4.43% ) 
raised annual guidance and beat quarterly expectations.

Smith & Wesson Brands $SWBI ( ▲ 6.46% ) 
posted better-than-expected earnings driven by new product demand.

UiPath $PATH ( ▲ 5.9% ) 
raised its annual revenue outlook.

Quanex Building Products reported weaker third-quarter earnings and cut fiscal 2025 guidance.

Sector Watch

Bond Market

The 10-year Treasury yield dropped to 4.09%, lowest since April, after weak jobs data. The 2-year yield fell to 3.52%, steepening the yield curve as markets anticipate Fed easing.

• Bond demand could persist if labor data continues deteriorating

Policy Watch

Federal Reserve Policy Expectations
Markets price 100% odds of September rate cut with 12% chance of half-point reduction. Powell previously signaled readiness to cut if labor markets weakened.

• Trump posted that the Fed “should have lowered rates long ago”
• Political pressure adds urgency ahead of September 17 meeting

Labor Data Methodology Under Scrutiny
Commerce Secretary Lutnick defended BLS data quality after Trump fired the previous commissioner, claiming future reports will show “better accuracy.”

• White House advisor Hassett called the jobs report “disappointing” but expects it to “revise up”
• Markets continue trading on BLS data despite political rhetoric

Regulatory Rollbacks Continue
Trump administration plans to cancel Biden-era passenger compensation rules for airline delays and cancellations.

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What to Watch

Consumer Price Index Thursday, September 11 
August inflation data at 8:30 AM. Previous month showed annual CPI at 2.7%, core at 3.1%. Softer core reading would reinforce larger-cut odds; uptick could limit Fed flexibility.

European Central Bank Meeting Thursday, September 11 
ECB rate decision. Economists expect deposit rate to remain at 2%. Watch for signals about future easing.

Producer Price Index Wednesday, September 10 
Producer prices impact consumer inflation and margins. Core goods prices provide supply-chain signals ahead of CPI.

BLS Employment Revisions Tuesday, September 9 
Preliminary adjustments to recent employment data. Upward revisions might temper recession concerns; downward revisions would reinforce slowdown case.

Fed Decision September 17
Rate cuts guaranteed. Focus on magnitude and guidance about future moves. Markets will parse Powell's press conference for pace of cuts through year-end.

Thanks for reading 🙂

- John