Job Growth Slows in June, Yellen's China Talks, Twitter Threatens Meta 7/7/23

SPEAKER_1 (0:00)

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Carl Quintanilla (0:31)

Market Moving Insight and Analysis. Join Jim Cramer, David Faber and me, Carl Quintanilla on the opening bell hour of CNBC Squawk on the Street.

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Leslie Picker, Mike Santoli at the New York Stock Exchange. Jim and David have the morning off. June jobs is a miss, first one in over a year and that's with some negative revisions. Two-year yields back below five, but stocks are still on pace for a losing week. Our roadmap begins with that slowing job growth. The fewest jobs added in June since December of 2020, but wage growth is higher than expected. Will that change the Fed rate trajectory?

Leslie Picker (1:06)

Plus, Treasury Secretary Yellen coming to the defense of US businesses while walking a diplomatic tightrope in China. And checking in on the state of the consumer, Levi's slashing its guidance in Costco. Same-store sales slip once again.

Carl Quintanilla (1:21)

Let's get right into market reaction to the jobs number. A lot of interesting internals in this print this morning. Restaurants down eight, first decline there in I think 28 months. Government jobs, about a third of the jobs added.

Mike Santoli (1:32)

Yeah, so private sector was a little bit weaker in terms of job creation. It had the market really in a misdirection move leading into this, right? Yesterday was all about mini panic in the bond market about a super hot number in the ADP report. So this really did take away a lot of that concern. On the other hand, there are no all clears in this particular moment in the cycle. It's either a weakening jobs picture is okay. We can moderate the growth that's expected, but a miss after 14 months of beats on the top line payrolls number, then it brings up the idea of is this finally the inflection point?

Not sure we have to panic about that yet, but you do mention the stronger wage number. We are on track for the Fed to be doing more. And I think we're just at this moment where you're never too far away from one thing you're afraid of or the other. The market's had a nice run here.

Bond market is kind of calming down, but not really taking back a lot of that yield jump yesterday. And we are in a zone where yields at this level, especially going up at that pace, do pinch in terms of equity sentiment, in terms of bond market volatility, feeding into equity volatility, and also restraining the economy. You know, we're up in the area of real inflation-adjusted yields. We haven't been in 15 years or so. And that means the real economy kind of gets restrained by that. So all those things put together, it was a bullet dodged, I think, in a sense, you know, because we really were leaning toward the potential for a big upside surprise. But now it's, okay, now where are we? Do we have to brace for more slowdown?

Fed's still in the game, although still a go-slow Fed is okay for this market.

Leslie Picker (3:10)

Initially, you did see more of a reaction in the bond market. I'm curious, Mike, as traders started to digest this report, what is it that gave them more comfort, you think, once they got past that initial print?

Mike Santoli (3:21)

I just think it's the softness in the headline, the downward revisions from prior months, and this idea that we're not in this headlong reacceleration moment in job growth. Therefore, labor tightness is not getting exacerbated. We are now all of a sudden looking ahead to a CPI number next week. Some people are saying it's gonna come in below 3%. You have a lot of things working in your favor of getting a benign number for CPI next month. And then the question is, well, you're kind of running out of the better comparisons and maybe it firms up from there. So that's the tricky spot we are in.

And then, you know, until between now and earnings reports, I think this is what we're gonna be kicking around, how the Fed reacts to this kind of in the middle labor market report.

Carl Quintanilla (4:04)

Certainly, that's gonna be the tone of next week between the macro print CPI and, of course, the banks on Friday. Your point about whether or not this is the best it's gonna be this year is exactly what B of A says today.