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Good morning contrarians! The weekend was marred by the hostilities in the Middle East. As expected, this has led to risk-off across the board, though perhaps not (yet) with the magnitude that might be appropriate. As can be expected, defense industry stocks $LMT, $NOC, $RTX, and $GD are the biggest gainers among S&P stocks this morning.

There is a ton of speculation out there on the internets, none of which The Contrarian is qualified to weigh in on. For our purposes it’s just worth pointing out that markets hate uncertainty more than they hate bad news. As long as there is no visibility of a possible endgame in what is being called a full-fledged war by both sides, risk appetite will be hard to come by. This means shaky stock markets, higher oil prices, and probably a rally in bonds amid a flight to safety.

In light of that the movement in asset prices so far looks quite benign. More here, including a free audio clip from The Bottom Line segment of today’s podcast:

Good morning contrarians!

Today is the first Friday of the month, making it all about Non Farm Payrolls. The numbers are out at 0830. Economists expect 170,000 new jobs, effectively in line with the 187,000 seen last month, dropping the unemployment rate to 3.7% from 3.8%.

It’s the same playbook as before: hoping for data that shows a slowing labor market. If it materializes with a number (ideally much) lower than 170k, that could shift the narrative to something more conducive to risk-taking. A hot number, on the other hand, would bring fears of ‘higher for longer’ back in force.

More here:

Good morning contrarians! Some confounding signals from the market over the last 24 hours as bonds have rallied — especially at the short end of the curve — while oil has dropped precipitously. This looks like classic risk-off and doesn’t make sense in light of the ‘higher for longer’ fears we’ve been talking about.

Could something more sinister be afoot? A fund blowup? Or maybe there was a datapoint that went unnoticed but which has led investors to seek out the relative safety of short term bonds, for whatever reason?

Free audio included in today’s briefing so be sure to check it out:

Good morning contrarians! Yesterday was pretty ugly with selling in bond and stock markets alike. Today we’re due for a bunch of data — and Fed speakers — that could conceivably change the narrative, but probably won’t.

Sorry, just being realistic here. Free audio included with today’s briefing. Check it out:

Anybody who is long bonds and willing to come on the podcast to discuss it.

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Good morning contrarians! Bond yields are moving higher over renewed ‘higher for longer’ concerns, with added worries over the fiscal situation…

The Job Openings and Labor Turnover Survey, or JOLTS, is out at 1000. There are some indications of a softening labor market. Not just the Barron’s cover discussed yesterday.

We’ll probably need something more substantial before the Fed backs off their higher for longer language, but this could be the start. Maybe.

More here, including free audio from today’s podcast:

Good morning contrarians! Q4 trading gets underway with mixed signals from markets…

We did get a solid contrarian indicator this weekend where the labor market is concerned (see below). The headline is even better than the cover: “This Time Really Is Different for the Economy. Just Look at the Job Market’s Confounding Strength”

Can’t make this stuff up. But you can use that as a pretty reliable indicator that the labor market is about to turn. In fact, you can pretty much take it to the bank…

More here for premium subscribers:

Good morning contrarians! Futures are pointing to gains ahead of the PCE Deflator (the Fed’s preferred inflation gauge) at 0830…

The numbers we’re looking for are 0.5% month-over-month for the headline figure and 0.2% MoM for core, which excludes food and energy. This would translate to year-over-year measures of 3.5% for headline and 3.9% for core.

If we get 0.1% or even 0.0% it stands to reason that we should get a rally in stocks and bonds alike. It was December 2020 when we last saw the core PCE at 0.

And if the number prints above 0.2%? Then you can expect the selling to resume with force. Bond yields should rise again, especially at the short end of the curve.

More on this in today’s briefing and podcast:

Good morning contrarians! Micron ($MU) sold off overnight after earnings. As of 0640 things are pretty quiet. Jobless claims, pending home sales, and a ‘town hall’ hosted by Jay Powell are on the calendar. Also earnings from Nike ($NKE) after the close.

More here on this state of affairs: