ADP Report Shows Labor Market Cooling, Adam Parker's Market Message, Commerce Sec. Exclusive 8/30/23

SPEAKER_1 (0:00)

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David Faber (0:26)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:32)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla, David Faber at Post 9 of the New York Stock Exchange. Cramer has the morning off. Bulls trying to make it four straight gains after yesterday's action. Best day for the S&P since early June. On more signals, the labor market is normalizing. ADP is a miss. So is revised Q2 GDP 10-year 410 is about a three-week low. Our roadmap this morning begins with the economic data. Job growth slowing sharply in August.

David Faber (0:57)

Plus HP Inc is the biggest laggard on the S&P. It's posting its third straight revenue miss. That's the longest streak in almost eight years for that company.

And we're keeping an eye on Hurricane Nadalia making landfall in Florida. It has been downgraded to a Category 3 storm. We will get some live reports on what's going on there.

Carl Quintanilla (1:18)

Let's begin with the markets though and the Fed in light of this morning's eco data. As we said, ADP 177, we were looking for 200K. David, that's the lowest since March. Not everybody watches it, but certainly coming on the heels of jolts.

Some people will take it.

David Faber (1:31)

Yeah, well, jolts yesterday was jolting, I guess to a certain extent, wasn't it? We were on, we watched those yields decline fairly markedly on the longer end, but overall. And the market had quite a strong day yesterday. The question, of course, coming into today is can we continue? But particularly sort of the higher multiple mega cap tech names and just in general, the NASDAQ comp having a very strong session.

Carl Quintanilla (1:54)

I know you've been watching Nvidia and sort of what the action post print sort of told us, but up 6% first two days of the week.

David Faber (2:01)

Yeah, reversing, of course, what was the unexpected, I would argue, response to an earnings report, the likes of which we've rarely seen, following an earnings report, the likes of which we've rarely seen, essentially exceeding all analysts' expectations and the guidance. And yet, as we pointed out many times, the stock did not react positively. But thus far this week, that has been a very different story for Nvidia shares. You can see it right there, month to date now up about 5%. It did move up a bit, remember, into the print itself of earnings.

And you had that partnership as well with Alphabet that was announced.

Carl Quintanilla (2:35)

Yeah, some discussion that maybe the AI sort of fascination is reasserting itself. Amelia's with this note arguing today that is it fair to call Nvidia cheap?

Their target is 730 They do say a modest premium to its own AI basket, cheaper than Alphabet, which had its own news yesterday.

David Faber (2:54)

Yeah, I mean, hard to imagine. You can be talking about a company trading what, mid-30s forward year, right? I think that's where we sort of were yesterday at the, or with the recent lows.

Given its growth rate, which is above that of any of the other names, you might expect that that's a multiple that the market actually would say seems fairly reasonable. If not, again, you could argue. I'm not going to argue it, but others, I'll let others argue that it might even be cheap.

A company going from what 16 billion in quarterly revenues to what some analysts believe could be as much as 25 billion a quarter, given the insatiable demand for the product, of course, right now, and being alone essentially in producing the highest end chips to power the generative AI applications that are being used. Although Carl, more questions about the end use case, the journal story today, about some of the smaller players and the venture capital side of the equation and whether or not that is going to slow markedly, given there does seem to be perhaps a bit of a diminution in enthusiasm. Even ChetGPT's user numbers, for example, having declined a bit.

Carl Quintanilla (4:01)

All of this, of course, sort of reinforces the point that the market is highly tuned to what yields are doing. As we said, 10 year, which got to 410 yesterday, revisiting it today, the two year got to 487, as the market would love to see more signs of certainly labor market normalization.