Market maintains buying pressure with SPX holding above 4400
Market opens Tuesday's trading session in a positive gamma environment with dealers continuing to cover shorts quite clearly with VIX pushed strongly below 15 right from the opening. The NASDAQ block, mainly mega cap tech stocks, is where capital flows are strongest attracted in the morning before retail also starts participating in this shorts-cover rally. As mentioned in yesterday's recap, the 4400-4500 region of SPX is quite "open", allowing SPX to move almost in a straight line throughout the morning.
Today although organic buy volume has appeared clearly on the market, this rally mostly still comes from “extreme positions” with too many shorts from before Jackson Hole crushed by the decline in volatility. Above 4400, the market continues to maintain bullish bias with most hedges concentrated on the 09/22 OpEx week - promising volatility will return.
Job openings plunge to record low only after Covid period
Compared to the predicted 9.465 million, actual June job openings fell to 8.827 million, down 1.493 million from the previous quarter, marking the second largest drop in history only after Covid.
Looking back at last month, if BLS hadn't revised May data from 9.582 million down to 9.165 million, the above drop would have reached over 800,000.
Industries with the largest job cuts:
Business services (-198,000).
Health care and social assistance (-130,000).
In other words, the number of job openings is only exceeding the number of unemployed workers by 2.986 million, the lowest since August 2021.
The number of quits (indicating workers confident in finding better wages) also plunged 253,000 to 3.549 million, the lowest since February 2021.
New hires also fell 167,000 in July to just 5.773 million (lowest since January 2021).
Labor demand is exceeding the number of job openings.
Consumer confidence index falls in August
Consumer confidence index drops to 106.1 (significantly lower than expected 116).
Inflation expectations tick up slightly to 5.8%, nearing the lowest since October 2020.
Overall, the labor market is starting to tighten due to declining job openings
Bond auction yields hit 17-year record
2-year and 5-year bond auction yields recorded the highest since before 2008, reflecting a sell-off wave in the market. 2-year bond yield reached 5.024% (vs 4.823% last month).
5-year bonds also recorded highest yield of 4.400%, highest since 2007. Overall, yields across tenors are rising due to massive bond supply from the government to cover the budget.
Home prices rise for 4 consecutive months
Home prices in the 20 largest cities rose +0.92% from the previous month, marking 4 consecutive months of gains.
Mortgage rate at 20-year high
Some other news:
JPY could weaken to 30-year low: In the next 6 months, Goldman Sachs predicts USD/JPY could reach 155 - weakest since 1990 if BOJ continues slow rate adjustment stance.
Best Buy stock up about 1.3% after Q2 earnings beat Wall Street expectations.
Hong Kong home prices fall for 3 consecutive months to 6-month low amid rising rates, down 1.1% from July, marking the largest drop this year.
Chinese foreign investors continue net selling stocks, showing government support policies not very effective. Overall, investors still need fresh cash more than slow support policies.
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