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Remember that jobs report we’ve been waiting for all week? Well, it wasn’t very good. However, the major indices took it in stride with only slight declines on Friday, leaving us with positive returns for the whole week. And now we can get ready for earnings season.
The Government Employment Situation report stated that only 194,000 jobs were added in September, which significantly missed expectations for around 500K. The result marked a second consecutive month with a huge miss, though the unemployment rate did drop to 4.8%.
So was this disappointing number still enough for the Fed to set a date on tapering? Or will they just delay it for now until the economic recovery heats up again? That’s the big question as we move toward the Committee’s next meeting.
The market’s three-day winning streak ended on Friday, but the major indices handled the news well and slipped only slightly in the session.
The NASDAQ saw the steepest decline of 0.51% (or about 74 points) to 14,579.54, but finished the week higher by nearly 13 points. It may not seem like much, but don’t forget that this tech-heavy index started the week on Monday with a 2% purge and lost more than 3% last week. All in all, it wasn’t a bad performance at a time when tech is under pressure.
The S&P dipped only 0.19% to 4391.34, while the Dow was pretty much breakeven. Technically though, it slipped 0.03% (or nearly 9 points) to 34,746.25. These indices were up for the week by 0.8% and 1.2%, respectively.
So the big impact of the week turned out to be the short-term debt ceiling extension, which pushed the deadline back to early December and gives Congress more time to keep the country’s debt from defaulting for the first time in history.
With the jobs report now in the past and the debt ceiling extended, the next major event for investors is earnings season. It begins slowly in the latter half of next week with some of the big banks, including JPMorgan (JPM) on Wednesday. Then we’ll get Bank of America (BAC), Citigroup (C) and Wells Fargo (WFC) on Thursday, along with other reports spread throughout the week.
Since we’re about to begin earnings season, it’s time to check in with our Director of Research Sheraz Mian. His new Earnings Preview article is fresh off the presses and titled: “What Will Q3 Bank Earnings Show?”
“For the Zacks Major Banks industry, which includes these major banks and account for roughly 45% of the Finance sector’s total earnings, Q3 earnings are expected to be up +11.2% on +2.5% higher revenues,” said Sheraz in that article.
“This would follow +298.1% earnings growth on -2.1% lower revenues in the preceding period (2021 Q2). For the Finance sector as a whole, total Q3 earnings are expected to be up +19.9% on +4.9% higher revenues.”
Things are about to get a whole lot more interesting as we move into earnings season. So rest up over this weekend and get ready…
Today’s Portfolio Highlights: 
Surprise Trader: With the debt ceiling and the jobs number out of the way, it’s time to start thinking about earnings. The season unofficially begins late next week, and Dave made his first pick on Friday with Commercial Metals (CMC). This Zacks Rank #1 (Strong Buy) is from the Steel – Producers space, which is in the top 25% of the Zacks Industry Rank. It has a positive Earnings ESP of 6.47% for the quarter coming before the bell on Thursday, October 14. CMC was added today with a 12.5% allocation, while the editor also sold KB Home (KBH) after this “choppy market took the wind out of its sails”. Read the full write-up for more on these moves.
Headline Trader: “The stock market has slowly drifted lower from yesterday’s overzealous open (catalyzed by short-term debt ceiling relief). It was likely a sluggish trading day because institutional investors didn’t see a jobs report like this coming and had sufficient time to assess its convoluted implication.
“The markets were looking for a “goldilocks” report, but this one came in a bit cold. This morning’s one genuinely positive headline figure was the unemployment rate, which fell to 4.8% from 5.2% in the month prior, much better than economists’ 5.1% consensus estimate.
“I typically take the unemployment rate with a grain of salt, but this 20-basis point decline is significant enough to warrant an explanation. With labor participation declining from August, I surmise that this sizable drop in unemployment is likely related to gig workers going back to their “unaccounted for” flexible jobs, specifically drivers for Uber (UBER) and Lyft (LYFT).”
— Dan Laboe
Have a Great Weekend!
Jim Giaquinto

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Roland Millaner