Key Takeaways
- Jobs Report Stronger Than Expected
- Nvidia Splitting 10:1 After Market Close
- GameStop Preannounces Earnings Miss
Markets were little changed on Thursday but for the week, the S&P 500 is up nearly 1.5% and Nasdaq Composite is up by 2.5%. However, all that can change following today’s jobs number. According to Bloomberg, economists had been expecting 182 thousand new jobs and an unemployment rate of 3.9%. The actual numbers showed 272 thousand new jobs and an unemployment rate of 4%. The news sent stock futures lower and interest rates higher with the 10-year note moving up to 4.42%.
As I discussed earlier in the week, markets have moved their focus from earnings to economic data as investors await what the Federal Reserve will do for the remainder of the year. Heading into this morning’s jobs number, there was virtually no expectation of an interest rate cut at next week’s Federal Reserve Open Market Committee (FOMC) meeting. Chances of a cut in July were just 19%, leaving September as the month where most expect a cut according to the CME Fed Watch Tool (there is no August meeting). Prior to this morning’s number, those probabilities were nearly 68% and following the jobs report that number dropped to 56%, once again dampening hopes for a rate cut anytime soon.
This week’s jobs data will be followed next by the Consumer Price Index (CPI), Producer Price Index (PPI) and the above-mentioned FOMC meeting. Along with their decision on rates, the Fed will also release their latest projections on interest rates, offering investors additional insight into longer-term thinking around monetary policy. I’m particularly interested in what Jerome Powell will have to say in light of yesterday’s decision by the European Central Bank (ECB) to cut interest rates by a quarter-point, moving rates down to 3.75% from 4%. That was also the first interest rate cut by the ECB since 2019.
In addition to the economic data scheduled for next week, we’re also going to see shares of Nvidia begin trading at their ten-for-one split-adjusted price on Monday. That split actually takes place today after the close. If you have ten shares of Nvidia at the close of trading today, you will have 100 shares come Monday. For options traders, if you have one option at today’s close, you will have ten come Monday. While the notional value of the stock and options should theoretically be the same, there will be increased unit risk because of the split. Therefore, it is worth taking a look at your portfolio to make sure your allocation is still in line with your longer-term objectives.
GameStop is also in the news again this morning. The meme stock saw its share price surge 47% Thursday after Keith Gill, better known as Roaring Kitty, announced he would be hosting a live event on his YouTube channel today at noon ET. The announcement excited his legion of followers and helped to make options on GameStop become the sixth most actively traded underlying for the day. Then this morning, GameStop preannounced their earnings. The company, which had been expected to announce earnings on June 11th, missed on both earnings and revenue. GameStop also said they filed to sell an additional seventy-five million shares, which comes on top of the forty-five million they already sold recently. In premarket activity, shares are down around 15%.
For today, I have a few things I’ll be watching. First, I’m curious just how strong the impact of today’s jobs number will be and if markets ultimately shrug off the report or not. I say that in part because looking at volatility, this market seems unconcerned. The VIX, despite being up 2.5% in premarket, is still below 13. That is well below its historical average and not a number that suggests concern over equity prices. Second, as I mentioned, I’ll be watching Nvidia. This stock has built up a significant amount of investor FOMO ahead of its split and I’m curious if that carries into today’s close. Then finally and perhaps even more obvious than Nvidia, I’ll be watching GameStop to see how it trades in the lead up to and aftermath of the Roaring Kitty broadcast. While I can certainly appreciate the enthusiasm for both Nvidia and GameStop, I would also be cautious if you’re trading either of these. There’s nothing wrong with speculation, but for most investors, speculation should remain a small percentage of their overall investable assets. As always, I would stick with your investing plan and long-term objectives.
tastytrade, Inc. commentary for educational purposes only. This content is not, nor is intended to be, trading or investment advice or a recommendation that any investment product or strategy is suitable for any person.
Read the full article here