Punked by Payrolls

The market saw something it didn’t like in August’s payrolls report, as stocks sunk further following the release.

S&P 500 futures have fallen 0.4% at 8:33 a.m., while Dow Jones Industrial Average futures have declined 90 points, or 0.4%. Nasdaq Composite futures have dropped 0.6%. The 10-year Treasury yield has risen 0.035 percentage point to 2.91%.

The U.S. added 201,000 jobs in August, a touch higher than the 200,000 expected by economists, while the unemployment rate remained unchanged at 3.9%. It had been expected to fall to 3.8%. Average hourly earnings rose 0.4% in August from July, and 2.9% from a year ago. But that number might not be as impressive as it looks. “Taking a closer look at the wage gains, while the YoY improvement was impressive, on a 3-month annualized basis the increase was to 3.06% from 2.97% (yawn) and is effectively unchanged from the March level of 3.05%,” writes BMO Capital Markets’ Ian Lyngen. “Said differently, if comparable wage gains in Q1 didn’t translate to realized inflation in H1, we’re left to wonder if it will truly be ‘different this time’.”

But that hasn’t stopped the market from reacting as if there’s real inflation–and more Fed hikes–coming down the pipeline. All this reminds Gluskin Sheff’s David Rosenberg of the late 1990s. “Dotcom’s then, FAANGs today. EM crisis then, same today. Strong dollar. A commodity bear market. Fed tightening. A Prsident under stress,” he writes. “What is really similar, and classically late cycle, is the concentration of the stock market.”

Whether history repeats, or simply rhymes, remains to be seen.

Morning Movers

Broadcom (AVGO) is up 4.6% to $225.88 after reporting third-quarter earnings. The chip maker earned $4.98 a share on revenue of $5.06 billion. Analysts were looking for earnings of $4.82 on revenue of $5.06 billion. For the fourth quarter, it sees revenue of $5.4 billion, compared with the $5.36 billion consensus estimate.

Costco Wholesale (COST) is up 1% to $239 after reporting August comparable sales grew 9.2%.

GameStop (GME) is down 4% to $15.50 after reporting second-quarter earnings. The video game seller earned a nickel a share on revenue of $1.65 billion. Analysts were looking for earnings of 7 cents a share on revenue of $1.61 billion. For the full year, it sees EPS of $3 to $3.35, compared with the $3.09 consensus estimate.

Marvell Technology Group (MRVL) is up 8.9% to $21.20 after reporting second-quarter earnings. The semiconductor firm earned 35 cents a share on revenue of $665.31 million. Analysts were looking for earnings of 35 cents on revenue of$685 million. For the third quarter, it sees EPS of 30 cents to 34 cents, on revenue of $825 million to $865 million. Consensus calls for earnings of 37 cents on revenue of $880 million.

Palo Alto Networks (PANW)  is up 5.9% to $233.26 after reporting fourth-quarter earnings. The network security provider earned $1.28 a share on revenue of $658.1 million. Analysts were looking for earnings of $1.17 on revenue of $634.14 million. For the first quarter, it sees EPS of $1.04 to $1.06, compared with the $1.04 consensus estimate.

Tesla (TSLA) is down 5.1% to $266.75 after its chief accounting officer resigned after just a month on the job. —Teresa Rivas

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