"Perfect Number" - Stocks & Bonds Soar After "Universally Weak" Payrolls Data, Dollar Dumps

 Weak jobs growth and easing wage growth - just the kind of 'bad' news that markets love, and sure enough stocks and bonds are soaring as the dollar dives on dovishly-diving rate-change expectations. As Capital Economics points out:

“The strongest argument for the Fed to abandon its tightening bias is that wage growth continues to slow with average hourly earnings rising by a muted 0.2% month on month and the annual growth rate falling to 4.1% -- the lowest since mid-2021.

“The decline in the job quits rate continues to suggest it will drop below 4% soon. Overall, we suspect the softening in labor-market conditions has much further to run and still expect the Fed to be cutting interest rates again in the first half of next year.”

Rate-cuts are coming...

Source: Bloomberg

Gregory Faranello, head of US rates trading and strategy for AmeriVet Securities, says the “employment report fits our view that the economy is slowing,” and in the wake of this week’s dovish Fed meeting and presser, adds: “It’s clear why Chair Jay Powell stood confident this week.”

“This is a perfect number for stock rally,” said Brent Donnelly, president of Spectra Markets.

And indeed it was, lifting Small Caps and Nasdaq to weekly gains of 6%...

Additionally, John Brady at RJ O’Brien calls payrolls “a bond-friendly number.”

“Don’t think the AHE numbers will be of much concern. Bad news (clearly softening labor market) is market good news.”

And he is right, yields have collapsed at the long- and short-end...

30Y yields are down

Source: Bloomberg

2Y yields are down 25bps from Wednesday's highs...

Source: Bloomberg

“The two-year’s move is stunning," said Steve Sosnick, of Interactive Brokers, adding:

"It’s a big move across the curve, but 14 basis points on the short end is enormous. WIRP now showing a cut by June instead of July. Modest payrolls and wage growth could imply that Goldilocks is really coming. Too early to say after one report, but for today, it’s exactly what bond bulls wanted to hear.”

Barry Knapp of Ironsides Research says this report is “for sure” a turning point for bond bulls.

Equity markets, on the other hand, “need the Fed to fully pivot,” he said.

The dollar puked, extending its weekly decline...

Prya Misra, portfolio manager at JP Morgan Investment Management, says:

“The market is responding as you expect on the weaker than consensus payrolls, downward revisions and wages.”

Gold initially spiked on the headlines as the dollar dives with spot prices topping $2000... but then it was curb-stomped back down again...

Ali Jaffery, an economist at CIBC Capital Markets, has this take:

“Weighing down the headline job number was 33,000 decline in motor vehicle and parts employment as a result of the UAW strike which should mostly reverse next month.”

“Overall, even abstracting from the UAW strike, today’s report suggests labor demand has been a bit cooler than the data was telling us in September and labor supply stalled at least momentarily.”

So it's bad news... which is just good enough for the algos to bid everything higher.

Meanwhile, the underemployment rate, or U-6, climbed to 7.2%, the highest since February 2022. This is a broader measure of unemployment that tracks the unemployed, as well as those marginally attached to the labor force and part-time for economic reasons.

Are we really 'celebrating' a two-year high in white unemployment?

Academy Securities' Peter Tchir agrees that it was indeed a "universally weak report".

Maybe as we dig through the details, we will find something “strong” in this report, but it seems weak across the board.

Jobs, only 150k is bad enough. Comes with 101k of negative revisions (why do we torture all those economists who made predictions, that looked wrong at the time of the release (their estimates were supposedly too low) only to find out 2 months later they were probably right?). Private sector was below 100k and manufacturing lost a significant number of jobs, despite re-shoring etc. (presumably the strikes impacted that though).

Hourly earnings were lower (in line with some other estimates yesterday of declining wage pressure, despite the high profile union deals).

The unemployment rate ticked up to 3.9% while the participation rate declined a touch – exactly the response you do NOT want to see. Fewer people looking trying to work and the unemployment AND underemployment rates nudged higher. This was because the household survey was a miserable job loss of 348k, making for net job losses over the past 3 months.

Hours worked, which hasn’t really supported the strength in prior job reports, inched down as well, not signally that this could be a one-time glitch.

I know that weather cannot be an excuse this time (it does get trotted out). The strikes could have had an impact, but I find it difficult to believe the impact is so big to drag down the entirety of this report (sure, the manufacturing side, but the report as a whole).

While the margin for error of both reports is obscenely high relative to how they are presented (BLS margin of error) I’m starting to wonder if the Household doesn’t reflect reality better, since it asks potential employees, not employers. The one argument I’ve heard, that I like, is that if someone is laid off, but receiving severance pay, the company reports them as employed, but the employee (or, technically, about to be former employee) views themselves as unemployed. To save you time on the link, the margin for error, to be “statistically significant” is 130k for the Establishment and 600k for the Household. I wonder, if with he lower response rates for the Establishment, the margin for error there isn’t even larger? In any case, why don’t we just get the raw data and let anyone who wants use Ai or their own algos to do all the adjustments? Maybe we’d get some interesting data that way?

Since I mention response rates (BLS response rates) the Current Employment Survey Statistics response rate was 32.5% for the July survey (last they had published). That was 67% as recently as December 2019! If I’m sending out a survey and the response rate is cut in half in less than 4 years (after being stable for a decade), I’d question the validity of the survey and the responses.

Sorry if I got a bit wonky at the end, but Garbage In, Garbage Out is one of the tenets that I live by and this data, between he margin for error issues and the response rate, seems fraught with garbage, despite being one of the biggest data days for the market (and companies) every month.

Bottom Line

Rates rally from here, sub 4.5% on 10s and we see whether any shorts (and a bunch got reset post Fed) get stopped out.

Risky assets should rally for now, but recession chatter will act as a dampening effect (along with the already large surge we’ve seen this week).

I really, really like top quality IG bonds here on a spread basis.

I think investors, as they figure out how “safe” treasuries are, will start being more overweight top quality IG bonds, over treasuries, helping spreads perform well.

https://www.zerohedge.com/markets/perfect-number-stocks-bonds-soar-after-universally-weak-payrolls-data-dollar-dumps

Lawmakers Demand Answers From Costco Over Sale Of Surveillance Gear With 'Banned Chinese Components'

 by Katabella Roberts via The Epoch Times (emphasis ours),

Two bipartisan lawmakers are demanding answers from Costco over its decision to continue selling Chinese-manufactured security products that have been linked to human rights abuses and cybersecurity risks.

In a letter dated Oct. 31, Rep. Christopher Smith (R-N.J.) and Sen. Jeff Merkley (D-Ore.) questioned the retail giant's continued sale of Lorex security products, noting the company previously had ties to China-based company Dahua, whose products are restricted in the United States by the Federal Communications Commission (FCC).

Lorex is a former subsidiary of camera maker Zhejiang Dahua Technology, a China-based company that was added to the U.S. trade blacklist in 2019 owing to the Chinese Communist Party's (CCP's) treatment of Uyghurs and other predominantly Muslim ethnic minorities.

The U.S. Department of Commerce, in placing the company on the blacklist, said it and other entities "have been implicated in human rights violations and abuses in the implementation of China's campaign of repression, mass arbitrary detention, and high-technology surveillance against Uighurs, Kazakhs, and other members of Muslim minority groups" in China's Xinjiang region.

Additionally, the FCC last year banned the sale of new telecommunications and surveillance equipment made by Dahua, citing an "unacceptable risk" and national security concerns.

Dahua sold Lorex earlier this year to Taiwanese-based company Skywatch for around $72 million.

However, in their letter to Costco Chief Executive W. Craig Jelinek, Mr. Smith and Mr. Merkley said Dahua still supplies all the component parts for the Lorex cameras and other surveillance equipment.

The continued sale of Lorex security equipment throughout the retailer's stores allows Dahua to profit from the U.S. market despite its equipment being banned from U.S. government use, they argued.

'Invasive Surveillance Technology'

The lawmakers went on to note that Costco's competitors including Best Buy, Home Depot, and Lowe’s, have all discontinued the sale of Lorex products, citing human rights and ethical sourcing concerns.

This, they said, makes Costco’s continued sale of the equipment "all the more puzzling and seemingly in conflict with your company’s stated commitment to the United Nations Guiding Principles on Business and Human Rights and the International Bill of Human Rights."

Costco's Code of Conduct prohibits human rights abuses in its supply chain.

The lawmakers also went on to note that the U.S. government had linked Dahua to the genocide of the Uyghurs and other predominately Muslim ethnic minorities in Xinjiang Uyghur Autonomous Region (XUAR).

"Dahua developed alert and tracking technology that allows police to identify ethnic Uyghur faces and deploy invasive surveillance technology, such as Wi-Fi sniffers," they wrote. "Dahua also co-developed 'ethnicity tracking' technical standards within China that predict the probability an individual is a Uyghur, Tibetan, or other ethnic group."

"We should all agree that in a national security state like the PRC [People's Republic of China], Dahua’s efforts to help track and identify ethnic minorities are particularly noxious and should be condemned. American consumers should not be subsidizing a company actively enabling the PRC’s atrocities, including imports of goods made with forced labor in the XUAR," they said.

Critical vulnerabilities also regularly discovered in Dahua products pose a known security risk to U.S. customers too, the lawmakers argued, noting reports of "unauthorized viewing of video and audio feeds and archives, as well as unauthorized network access and remote tampering with settings."

Seafood From Chinese Firms 'Using Forced Labor'

Dahua has denied claims it shares any data and said its products are safe.

However, the lawmakers noted China's 2017 National Intelligence Law which requires companies, including Dahua, to support the CCP's intelligence work, meaning they are unable to withhold data collected from Chinese authorities, should they request it.

Thus, the lawmakers requested Costco hand over an array of documents and information including an explanation as to why it has not stopped selling the Lorex products and how its sale of the equipment complies with U.S. restrictions.

Additionally, the lawmakers also asked Costco to provide details—including the audits and risk assessments it uses—to "justify" its sale of seafood from Chinese companies that allegedly use forced labor to catch and process seafood for U.S. consumers, citing recently published research by The Outlaw Ocean Project.

According to that research, ethnic Uyghurs are being relocated and forced to work in processing facilities operated by an array of Chinese firms, with the seafood items making their way onto the shelves of U.S. retailers, including Costco, Kroger, and Walmart, among others.

In response to the claims made in the Outlaw Ocean Project report, a spokesperson for Walmart told The New Yorker that the company "expects all our suppliers to comply with our standards and contractual obligations, including those relating to human rights."

A spokesperson for Albertsons told the publication it would stop purchasing certain seafood products from Canadian importer High Liner Foods, which reportedly worked with Chinese suppliers.

Costco and Kroger did not respond to The New Yorker's request for comment at the time.

Responding to the lawmakers' letter, a representative for Costco told The Wall Street Journal, "We are currently reviewing the letter, and we will respond in due course."

The Epoch Times has contacted Costco for further comment.

https://www.zerohedge.com/geopolitical/lawmakers-demand-answers-costco-over-sale-surveillance-equipment-made-using-banned

agilon health Reports Third Quarter 2023 Results

 Revenue increased 75% to $1.22 billion, Medicare Advantage membership increased 58% to 420,300, and total members live on the agilon platform grew to 508,000

Strong performance across core partner markets supported by membership growth and profitability gains in Medicare Advantage and ACO REACH

Sale of MDX Hawaii enables agilon to focus on its core partner markets

https://www.businesswire.com/news/home/20231102974205/en/

Werewolf Preliminary Monotherapy Data from Phase 1/1b Clinical Trial Establishing Proof of Mechanism

 

• Preliminary data on WTX-124 provide compelling early evidence of dose-dependent biomarker and antitumor activity in patients with advanced or metastatic solid tumors relapsed or refractory to standard of care therapy, including two patients with ongoing unconfirmed partial responses (uPR) in the highest dose tested to date, cohort 4 (12 mg) -

• Safety data indicate WTX-124 is generally well-tolerated through cohort 4 with no dose limiting toxicities and no indication of vascular leak syndrome (VLS) or other typically severe IL-2-mediated toxicities -
  
  
• Preliminary data support the potential of WTX-124 to be a differentiated next-generation IL-2 compound by showing immune cell activation in the tumor microenvironment (TME) and monotherapy clinical activity in an outpatient setting -
  
  
• Wide therapeutic index supportive of continued dose escalation with cohort 5 (18 mg) fully enrolled and with additional interim data from monotherapy dose escalation arm and recommended dose for expansion arm expected in the first half of 2024 -

Conference Call Information:
Management will host a call to review the preliminary data today, November 3, at 8:30 AM ET. Details for the call can be found here and at https://investors.werewolftx.com/news-and-events/events.

https://www.globenewswire.com/news-release/2023/11/03/2773081/0/en/Werewolf-Therapeutics-Presents-Preliminary-Monotherapy-Data-from-Phase-1-1b-Clinical-Trial-Establishing-Proof-of-Mechanism-for-WTX-124-at-the-Society-for-Immunotherapy-of-Cancer-s-.html

Tenon Medical Passes FDA Level 2 Inspection

 Tenon Medical, Inc. ("Tenon" or the "Company") (NASDAQ:TNON), a company transforming care for patients suffering with certain sacroiliac joint disorders, announced today, the US Food and Drug Administration (FDA) concluded a full Quality System Inspection Technique (QSIT) Level 2 Inspection at Tenon Medical. The QSIT inspection, used to assess a medical device manufacturer's compliance with the Quality System Requirements (QSR) and related regulations, guides the FDA investigators in performing an efficient and effective inspection, focusing on all key elements of a firm's Quality Management System.

An FDA Form 483 is issued to firm management at the conclusion of an inspection when an investigator has observed any conditions that in their judgment may constitute violations of the Food Drug and Cosmetic (FD&C) Act and related Acts. Observations are made when in the investigator's judgement, conditions or practices observed would indicate that the device has been adulterated or is being prepared, packed, or held under conditions whereby it may be come adulterated or rendered injurious to health.

At the conclusion of the inspection on November 1, 2023, the FDA investigator determined there was no need to issue Form 483 and the Closing Meeting was completed with no observations or objectionable conditions identified. A final report will be issued to the Company over the coming weeks.

https://www.accesswire.com/viewarticle.aspx?id=799180

Definitive Third quarter revenue grew 14% year-over-year to $65.3 million

 “Revenue and adjusted EBITDA for the quarter were both above the high-end of our guidance ranges for the quarter,” said Robert Musslewhite, CEO of Definitive Healthcare. “We were pleased with our increased adjusted EBITDA profitability in the quarter. We have been focused on becoming more efficient across all parts of the organization and it is nice to see that work yielding some measurable results. As we continue to pursue the large and growing healthcare commercial intelligence market, we’ll continue to take a balanced approach between growth and profitability and invest in strategic areas that should lay the foundation for faster growth when market conditions improve.”

https://www.globenewswire.com/news-release/2023/11/02/2772812/0/en/Definitive-Healthcare-Reports-Financial-Results-for-Third-Quarter-Fiscal-Year-2023.html

CMS Increases Outpatient Payment forCVRx Procedure

 CVRx, Inc. (NASDAQ: CVRX) (“CVRx”), a commercial-stage medical device company, announced today that Centers for Medicare and Medicaid Services (CMS) has reassigned the Barostim implant procedure for procedures performed in the outpatient setting as part of the 2024 Medicare Hospital Outpatient Prospective Payment System (OPPS) final rule.

In the 2024 OPPS final rule, Barostim was reassigned to New Technology APC 1580, which carries an average payment amount of $45,000. The new payment takes effect January 1, 2024. In 2023, Barostim was assigned to APC 5465, which carries an average payment amount of $29,000, with a Transitional Pass-Through Payment set to expire on December 31, 2023.

https://www.globenewswire.com/news-release/2023/11/03/2773144/0/en/CMS-Increases-Outpatient-Payment-for-Barostim-Procedure.html