Jobs Chill, Apple Guidance, Amazon Rally 8/4/23

SPEAKER_1 (0:00)

What's on the horizon for financial markets?

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Carl Quintanilla (0:31)

Market insight and analysis.

SPEAKER_3 (0:32)

You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:37)

Good Friday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Mike Santoli, Morgan Brennan here at Post 9 of the New York Stock Exchange. Jim and David have the morning off. July jobs comes in with a second straight miss, 187,000 with some negative revisions.

Two straight months now below 200K. Pre-market pretty steady as we look over last night's stack of earnings as well. Our roadmap begins with that cooling labor market. July payroll growth below expectations. What does that mean for the Fed?

Morgan Brennan (1:03)

Plus, Apple weighing on the markets, the company delivering a surprise profit and record services revenue, but says weakness in PC and iPad could continue to drag down sales.

Mike Santoli (1:13)

And Amazon shares rallying after reporting blowout profit beating on sales and the company issuing optimistic guidance as well.

Carl Quintanilla (1:21)

Interesting internals in the jobs report this morning. As we said, 187K, unemployment 35, average hourly earnings, a touch hot, but the workweek shrank, Mike. So total weekly pay actually below expectations.

Mike Santoli (1:33)

I think it all nets out to consistent with a slowing but still tight labor market and a relatively soft landing for the economy.

You did have those downward revisions as you mentioned. So decelerating, but also the lower unemployment rate implies just not a huge supply of idle workers to draw from here.

The main market kind of bank shot on this is what does it mean for treasury yields. That's been the story all week. You've had longer term yields really going higher. Not much because of repricing what the Fed's going to do, but just in general a lot of dynamics pushing in that direction, mispositioning Japan yields, a lot of things happening. Anyway, the yields have cooled off at least right now. They're at the top end of their range back to the fall, October, November.

Morgan Brennan (2:16)

Yeah, as Rick Santoli pointed out when we did get that jobs report hitting the tape earlier, treasury yields largely unchanged, if anything, down slightly, at least the 10-year yield right now. And you're seeing that actually give lift to equities here. I realize small gains pre-market, but in a week where we're down and we saw some larger moves, some of the largest moves, daily moves for the S&P, for example, that we've seen in a couple of months, I realize we haven't seen very big moves in the last couple of months.

You know, it's certainly notable.

Mike Santoli (2:45)

No, there's definitely been a little bit of a break in the calm.

Momentum has flagged, clearly. We came out of July running very hot. Everyone agreeing we're probably going to have to cool off seasonally. I think the question is, you know, we've down 2.5%, 3% from the highs in a week.

That's nothing, basically, in terms of pullbacks. But we did have a similar, very stunted pullback in June into July. So it would be the absolutely perfect bullish scenario if everyone bought this very shallow dip. I think there's a lot to ask. You have to see many things move together at once because you, aside from the seasonal effects, you do have still overbought conditions in some areas. And then just the earnings reactions.

Earnings have been good, well above expectations, consistent with the idea that earnings have troughed in the second quarter. But the ones that are missing are getting punished hard. The ones that are beating are not really getting rewarded that much. It shows you that the market kind of got to that spot before we heard the results.

Carl Quintanilla (3:40)

Does it do anything to help visibility through August, right? I mean, the Cramer's knock yesterday was that no real catalyst until Jackson Hole.

Dollar is a little bit lower today. Maersk is warning about lower container demand. ECB says, looks like Eurozone inflation has peaked. Maybe they pause in September.

Mike Santoli (3:59)

Right, it helps a little bit. I do think that we have another job support before the actual Fed meeting. You're going to get inflation.

I think that's what you're probably going to be looking toward. Because, again, we have to remind everybody that the Fed right now, it's not looking at secondary indicators and drivers of inflation and what the leads and lags are. They want the numbers to cooperate on the actual inflation prints. And so nothing's going to supersede what they tell us.