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A weak August payrolls report could put a half-point cut from the Fed in play. (0:17) Chinese EV makers report deliveries. (3:55) X in Brazil begins closing. (5:09)
Labor Day week on Wall Street will be all about… well, work.
The August jobs report is due out on Friday and after the fireworks caused by the July figures, there is expected to be a lot of competition for positions ahead of the release.
Economists expect nonfarm payrolls to have increased by 164,000, with the unemployment rate falling to 4.2% and average hourly earnings rising 0.3%.
Nomura said underlying job growth is cooling, but weakness seen in July appeared to be exaggerated by a temporary weather shock, which should normalize by August.
“Hiring is slowing, which should put upward pressure on the unemployment rate over the medium term, but without widespread layoffs the increase should be gradual,” they added.
Pantheon Macro says that aside from the Homebase figures, which appear to struggle to track official figures, other employment indicators “generally point to a labour market that is softening, though not imploding”.
But weak payrolls numbers could put a 50-basis-point Fed rate cut back on the table in September. Right now, markets are pricing in just a 30% chance of a half-point cut, but they are also pricing in a full point of cuts by year-end, with just three meetings left.
Responding to the latest Fed minutes, TS Lombard economist Steven Blitz says, “The FOMC is much less confident that monetary policy is in the right place than it was six weeks ago. Then, we read that monetary policy was 'well positioned' to handle whatever comes next. There was no such wording in July, just laments about the uncertainty of how policy advances and delays will affect economic activity.”
“With employment risk rising and inflation risk falling… some participants 'noted the risk that further gradual easing of labor market conditions could lead to a more severe deterioration.'”
“This is the problem with a data-driven approach: when bad data appear, policy is already too late.”
On the earnings front, Dollar Tree (DLTR) reports Wednesday with significant discount sector tension after Dollar General (DG) reported a 30% drop in earnings.
Dollar General had its worst trading day ever after the company warned about customers with “financial constraints.” Wells Fargo’s view is that Dollar General’s turnaround efforts have clearly run into problems.
Analyst Edward Kelly says, “We think macroeconomics, competition and lack of investment are taking their toll.” He also believes the retailer needs to make a big investment in labor (hours/rates) to regain confidence in the chain. Evercore ISI analyst Michael Montano also said Dollar General’s results show the challenge of maintaining market share with Walmart (WMT) gaining in a slower growth environment.
Amid the spotlight on Dollar General, Dollar Tree lost 14% for the week.
Also on the earnings calendar:
Zscaler (ZS), GitLab (GTLB) and PagerDuty (PD) will weigh in on Tuesday.
In addition to Dollar Tree on Wednesday, Hewlett Packard Enterprise (HPE), Dick's Sporting Good (DKS), Casey's General Stores (CASY), C3.ai (AI) and ChargePoint Holdings (CHPT) report.
And on Thursday, Broadcom (AVGO), DocuSign (DOCU), Samsara (IOT), NIO (NIO), Rent the Runway (RENT) and Planet Labs (PL) will report earnings.
Conferences should also add some action to the short trading week.
Intel (INTC), which is worried about barbarians at the gate amid a more than 55% year-to-date decline, will host an event in Berlin to launch the next generation of Core Ultra processors, codenamed Lunar Lake. During the live-streamed event, the company will reveal details about the new processors’ x86 power efficiency, core performance, graphics performance, and AI processing power.
Keynote speeches at the Roblox Developer Conference (RBLX) could also grab attention. And Citi’s Global Technology, Media & Telecom Conference will feature participation from Microsoft (MSFT), Super Micro Computer (SMCI), Dell Technologies (DELL), Intel, MongoDB (MDB) and Etsy (ETSY). Citi’s TMT conference has triggered stock price moves in the past based on management updates.
In news this weekend, Chinese electric vehicle makers reported delivery figures.
BYD Company (OTCPK:BYDDF) posted another record month of new energy vehicle sales in August as sales of plug-in hybrid electric vehicles hit a sixth consecutive record since March. China’s best-selling auto brand reported sales of 373,083 vehicles in August, beating July’s record of 342,383 units. That’s up 30% from last year.
Li Auto (LI) reported 48,122 deliveries in August, up 37.8% from the same month last year, compared with 51,000 in July. The company’s share of the new energy EV market of RMB 200,000 or more rose to 18% in July, surpassing Tesla (TSLA) and ranking first in sales among new energy EV brands in China.
XPeng (XPEV) said it delivered 14,036 smart electric vehicles in August, up 3% year-on-year and 26% from the previous month.
And NIO (NIO) said it delivered 20,176 vehicles in August, down for the second month. It delivered 11,923 premium smart electric SUVs and 8,253 premium smart electric sedans. Deliveries were down 1.5% sequentially and up 4% from a year earlier.
The shutdown of X, formerly Twitter, in Brazil began early Saturday. The AP says it is virtually inaccessible both on the web and through mobile apps. Elon Musk has refused to name a legal representative in the country, missing a deadline imposed by Supreme Court Judge Alexandre de Moraes. The two have been feuding for months over freedom of expression, far-right accounts and misinformation.
Musk said: “X is the most used news source in Brazil. It's what people want. Now, the tyrant Voldemort is crushing people's right to freedom of speech.”
De Moraes wrote in his ruling: “Elon Musk demonstrated his total lack of respect for Brazilian sovereignty and, in particular, the judiciary, setting himself up as a true supranational entity and immune to the laws of each country.”
For income-seeking investors, McDonald's (MCD), Lockheed Martin (LMT) and Nike (NKE) will begin paying dividends on Tuesday. McDonald's will pay on Sept. 17, while Lockheed will pay on Sept. 27 and Nike on Oct. 1.
Cigna (CI) will trade ex-dividend on Wednesday with a payment date of September 19.
Companies expected to increase quarterly dividend payments include VICI Properties (VICI) to $0.44 from $0.415, Stewart Information (STC) to $0.50 from $0.475 and Brady (BRC) to $0.24 from $0.235.
And in Wall Street's research corner, not all big shorts are created equal.
There is a relatively weak correlation between short positions in some assets and risk measures, indicating that not all stocks with significant short positions are experiencing difficulties defined by traditional metrics, according to S3 Partners, a well-known short position data tracker.
Market sentiment and valuation concerns are among the factors that can drive short interest beyond signs of immediate distress.
S3 examined three measures of pessimism for stocks:
- Average analyst ratings ranging from 1 to 5
- Credit default swap spreads, which reflect the cost of insuring a company's bonds and a measure of bankruptcy risk
- Altman Z-Score, a metric that uses fundamental indicators to estimate the probability of bankruptcy
Analyst Leon Gross says: “Our analysis reveals that while there is a statistically significant correlation between short position size and these measures of difficulty, the correlation is relatively weak, with a coefficient of just 0.20.”
Investors “might short stocks based on valuation concerns rather than signs of specific crises,” Gross said.
Short selling of an asset may also be part of broader strategies or hedging activities not linked to a crisis situation.
S3 identified “notable outliers” during its analysis, including American Airlines (AAL), which had a high short position of ~18.4% but a “moderate” CDS spread of 200 basis points and a low Altman Z-score, pointing to minimal bankruptcy risk.
“This discrepancy suggests that, despite moderate distress signals, AAL is heavily shorted, possibly due to market-specific sentiment or factors not reflected in these metrics,” Gross said.
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