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U.S. jobs growth beats estimates

Today’s Waves – 7th August

U.S. Jobs Growth Beats Estimates

Payrolls increased by 1.76 million in July, well above the consensus estimate of 1.48 million jobs that we expected to be added by the U.S. Economy.  This led to a fall in the unemployment rate to 10.2% as the U.S. economy continues a slow recovery from the effects of the coronavirus.

But Stock Markets Fear the Recovery is Losing Steam

Although monthly jobs beat expectations, markets continue to be worried about the resurgence of coronavirus around the world, U.S.-China tensions and a standoff between U.S. politicians that could derail another round of economic stimulus. 

U.S. markets were flat except for the tach-heavy NASDAQ, which was down 0.64% in mid-day trading.  European markets were also mostly unchanged with the exception of a 0.66% increase in the DAX to 12,674.88.  Overnight there was general weakness in Asian markets while traders digested the latest round of U.S. sanctions on 11 officials in China and Hong Kong, including Hong Kong Chief Executive Carrie Lam.  President Trump also issued two executive orders late Thursday placing restrictions on Chinese social networks TikTok and WeChat.  The market will be looking to see if and how China might respond next week.

Groupon Increases by Over 50% on Q2 Earnings

Shares in GRPN exploded higher following the company’s second quarter financial results, shares increased by $8.30 to $25.75.  Groupon has been hit hard by the effect of the coronavirus on travel and other leisure activities which generate substantial revenue for Groupon., however the company’s non-GAAP loss of 93 cents per share was much lower than the estimate of $2.63 among analysts who follow the stock.  Revenues came in a $396 million beating estimates by over 115%.

Groupon was able to surprise the market by generating higher than expected sales of goods to offset the damage caused by Covid-19 on its other business categories.

Quote of the day: “In investing what is comfortable is rarely profitable.

Robert Arnott

Biggest Bull

OSTK: Overstock continued its momentum fuelled run from March lows below $3 to today’s high at $112.62, an almost 20% increase from yesterday’s close of $94.14. The stock is now over 40 times higher than the absolute low from five months ago.  Is this tech winner overvalued, or will the shares continue to increase?

Biggest Bear

EURUSD: The US dollar trimmed its weekly losses as EURUSD broke under 1.1800, falling as low as 1.1755 marking the largest daily decrease since April.  The move was triggered by data indicating the U.S. labour market continued to recover despite the surge in Covid-19 infections during July.