Coffee With Greta: Stocks Drop on BIG Jobs Report Beat

DJIA Futures: -79 (-0.3%)

SPX Futures: -22 (-0.6%)

NASDAQ Futures: -122 (-1%)

Good morning friends!

Futures are dropping as Treasury yields pop after the release of a strong June jobs report.

Let’s get right to it!

June Jobs Report Comes in Hot

Job growth sharply beat expectations in June showing the U.S. labor market is still strong. 

The Labor Department reported the U.S. economy added 372,000 jobs last month vs economists’ expectations for 250,000.

The unemployment rate was unchanged from May at 3.6%.

April and May were both revised lower by 74,000 total jobs. 

The labor force participation rate was little changed at 62.2%, still below the pre-pandemic level of 63.4%.

Average hourly earnings rose 0.3% monthly and 5.1% annually, still far behind inflation.

But analysts expect the strong job growth to slow soon as the Fed continues and aggressive tightening schedule.

Treasury Yields Spike on Strong Jobs Report

Treasury yields popped higher after the release of the June jobs report but the yield curve is still inverted. 

The 2-year yield is up 10 basis points to 3.12% while the 10-year yield is up 8 basis points at 3.08%.

The rally in the bond market is dragging down stock prices. 

The strong job growth gives the Fed more room to stay aggressive on inflation without concern about hurting the labor market.

Fed Officials Support More Large Rate Hikes

Two Fed officials are expecting another 0.75% rate hike later this month. 

Speaking at an event on Thursday, Fed Governor Christopher Waller said, “I’m definitely in support of doing another 75 basis point hike in July, probably 50 in September, and then after that we can debate whether to go back down to 25s.”

St Louis Fed President James Bullard, who is a voting member of the FOMC this year, echoed that sentiment in a separate speech. 

Bullard said, “I think it would make a lot of sense to go with the 75 at this juncture. I’ve advocated and continue to advocate getting to 3.5% this year, then we can see where we are and see how inflation’s developing at that point.” 

Both officials downplayed fears over a recession but Waller did admit a slowdown may come with getting inflation under control. 

Waller said, “We’re going to get inflation down. That means we are going to be aggressive on rate hikes and we may have to take the risk of causing some economic damage, but I don’t think given how strong the labor market is right now that that should be that much.”

GameStop Fires CFO, Announces Layoffs

GameStop (GME) shares are down 6% ahead of the open after firing its CFO and announcing layoffs after-hours on Thursday. 

The company’s CEO Matt Furlong made that announcement in a memo to employees obtained by CNBC.

Furlong said GameStop is “making a number of reductions to help us keep things simple and operate nimbly with the right talent in place.”

He also said they will be “making a significant investment in our Store Leaders and field employees.”

The CFO is being immediately replaced by GameStop’s current Chief Accounting Officer.

Furlong said, “These changes will enable us to operate in a profitable manner as we execute against our strategy of pursuing sales growth in our commerce business and launching new products that empower customers within the digital asset and web3 gaming verticals.”

Twitter Slashes Recruiting Team

Twitter (TWTR) shares are falling 3.9% in premarket trade after announcing layoffs Thursday evening. 

The company is cutting 30% of its talent-acquisition team as part of cost-cutting efforts.

The cuts will impact less than 100 employees. 

Sources also told MarketWatch Twitter is pausing nearly all hiring.

A separate Washington Post report on Thursday claimed Elon Musk’s acquisition deal may be in jeopardy.

That report said talks have cooled after Musk’s team was unable to verify Twitter’s claims about the number of spam accounts.

Levi Strauss Tops Q2 Expectations

Levi Strauss & Co (LEVI) shares are up 3.8% ahead of the open after beating Q2 earnings expectations. 

The clothing retailer reported adjusted earnings of $0.29 per share on $1.47 billion in revenue. 

That beat analysts’ expectations for adjusted EPS of $0.23 on $1.43 billion in revenue.

Sales rose 15% year-over-year as digital sales jumped 20%. 

Levi maintained its full-year guidance for revenue growth between 11% and 13% and adjusted earnings between $1.50 to $1.56 per share. 

The company hiked its quarterly dividend to $0.12 a share from $0.10 a share.

Oil Prices Stay Volatile

Oil prices are dipping today as the market remains torn between supply worries and recession fears. 

West Texas Intermediate crude futures are down 0.4% to $102 bbl while Brent crude futures are slipping 0.2% to $104.50 bbl.

Both contracts are on track for weekly losses for the second week in a row.

The Energy Information Administration reported Thursday that U.S. crude inventories rose by 8.2 million barrels last week while gasoline stockpiles fell by 2.5 million barrels.

Gas Prices Tumble

U.S. gas prices fell for the 23rd day in a row. 

AAA shows the national average for regular gas fell more than 3 cents overnight to $4.721/gal today. 

Diesel also fell by more than 2 cents overnight to $5.675/gal.

The EIA reported Thursday that product supplied rose to 20.5 million barrels per day last week. 

Overall gasoline demand was down over 5% compared to a year ago.

In Case You Missed It

• Goldman Sachs (GS) economists slashed their Q2 GDP outlook on Thursday. The group now sees the economy expanding just 0.7%, down from the previous forecast for 1.9% growth. But the Atlanta Fed’s GDPNow tracker shows an expected 1.9% contraction in Q2. If that is the case, the U.S. would officially be in a recession.