Morning Minutes

Employment, Energy and Earnings In The Spotlight

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US index futures are in the green this morning with gains of 0.2% to 0.3%, building on yesterday’s index rebounds that varied between 0.8% for the NASDAQ and 1.8% for the Dow.

It has been a mixed morning for North American employment numbers. Canada posted spectacular job growth in November (153K vs street 35K), but the US was more disappointing. Offsetting yesterday’s positive news from continuing unemployment claims falling back under 2.0M for the first time since the pandemic started, US nonfarm payrolls were a big disappointment (210K vs street 550K and previous 546K).

Slower than expected job growth in the US and the recent decline in oil prices may take some of the pressure off the Fed to accelerate tapering at its meeting this month, but inflation remains an issue. Wage inflation weakened slightly last month but remains elevated. (4.8% vs street 5.0% and previous 4.9%).

Investors next read into the state of the US economy and the question of stagflation risk comes at 10:00 am EDT with the US ISM services report. Market expectations include 65.0 for the headline number, 80.9 for the prices paid (inflation) component, and 64.0 for the forward-looking new orders component

Overseas markets have been trying to regain their footing overnight and this morning with the Nikkei climbing 1.0%, the DAX and FTSE rising 0.3% and the Hang Seng stabilizing. Action in metals is mixed today with gold up 0.6% and copper down 0.2% suggesting some caution on the part of investors.

Canadian bank earnings week has wrapped up with a bang as Bank of Montreal completed running the table announcing a 25% dividend increase and a 22.5 million share buyback program. BMO also beat the street on earnings ($3.33 vs street $3.21), boosted by a big rebound in Canadian personal and commercial banking as the economy reopened. US earnings were mixed. Docusign has plunged 31.1% in premarket action despite beating the street on earnings ($0.58 vs street $0.46) after management indicated it expects sales to be up 30% next quarter, a slowing from the 40%+ growth of the last six quarters. On the other hand, Ulta Beauty is up 5.5% premarket after beating expectations ($3.93 vs street $3.46).

WTI Crude oil is up 2.8% today building on yesterday’s rebound. Oil caught a tailwind from the news that OPEC+ maintained its current pace of restoring production (even with some countries struggling to make their higher quotas), and indicated that it is prepared to call a meeting and potentially make changes on short notice if the Omicron variant has a significant impact on demand. Based on this and recent action, crude oil may be transitioning into a broad sideways band with OPEC+ apparently prepared to defend $60.00-$65.00/bbl, while the US, China and their allies appear prepared to stop prices from rising above $80.00-$85.00/bbl. Natural gas remains volatile with winter arriving in consuming regions, up 3.5% this morning.

Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

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