The monthly U.S. payrolls report used to be as much about gauging the Federal Reserve’s reaction as the actual number of Americans hired and fired. With Chair Kevin Warsh playing coy, it’s mostly about jobs. Economists surveyed by The Wall Street Journal think 83,000 were added in July—not great, but better than June. Tech stocks look poised to recover from Thursday’s memory-led drubbing while the broad market is mixed.
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“It’s
The monthly U.S. payrolls report used to be as much about gauging the Federal Reserve’s reaction as the actual number of Americans hired and fired. With Chair Kevin Warsh playing coy, it’s mostly about jobs. Economists surveyed by The Wall Street Journal think 83,000 were added in July—not great, but better than June. Tech stocks look poised to recover from Thursday’s memory-led drubbing while the broad market is mixed.
📈 Follow our live markets data and coverage.
“It’s mystifying to us”
With yet another possible deal being negotiated to unclog Middle East oil supplies, analysts need to solve a mystery pronto.
Like most whodunits, this one is about reconstructing past events. But it also has big implications for where energy prices are headed next.
Back in March, analysts warned that the greatest energy crisis ever would send oil to the triple digits. Prices barely spent any time there. Five months later, benchmark Brent crude is around $83 a barrel.
Part of the explanation is that, instead of a fifth of global supply being shut off, the Strait of Hormuz sprang lots of leaks—some ships snuck through and oil found a way out through pipelines. And, in addition to coordinated reserve releases, China saved the day by buying much less than usual.
Even adding a fudge factor to all that, though, there’s a huge gap in the math.
“It’s mystifying to us,” says Eric Nuttall, senior portfolio manager at energy-focused investment firm Ninepoint Partners.
The simplest explanation is that, squeezed by higher prices, demand slumped. But that’s far-fetched according to Bob Elliott, a veteran macro hedge-fund investor who’s now chief investment officer at Simplify Funds.
Taking inventory drawdowns at face value, he figures it would mean about a 1 billion barrel drop in demand, a 6% reduction. That would be twice what was seen during the global financial crisis and close to the decline in demand when Covid-19 stopped the world in its tracks. Yet flight data and car traffic are normal.
More likely is that we really didn’t know how much oil and refined product there was stored around the world at the outset. Unlike the U.S., which gives a detailed breakdown weekly of private and government stockpiles, much of the developing world is tougher to gauge.
But one thing’s for sure—you can’t use the same oil twice. That means warnings back in March that the world was being complacent may have just been early.
If that’s the case, though, then there’s another mystery—why wouldn’t smart energy traders bet on a spike now via the oil futures market? One reason might be that they’re hesitant after earlier warnings proved wrong. Another, says Nuttall, is that constant jawboning about deals has led to several price plunges, making traders cautious.
“You can have your entire year destroyed by a single tweet.”
If hidden barrels are nearly gone, then Nuttall says there’s a new data point to watch—not how much trapped oil has already escaped, but the dearth of tankers willing to sail back. They risk being attacked or marooned again. The timing for President Trump is awkward with congressional midterms three months away.
“It’s a ticking time bomb,” says Nuttall. “My base belief is Iran is fully aware of that.”
This is an edition of the Markets A.M. newsletter, preparing you for the trading day ahead with expert insight into the companies and industries set to move markets. If you’re not subscribed, sign up here.
Stocks I’m Watching
↘️ Trade Desk: Shares in the advertising technology company fell 27% after it reported lower-than-expected quarterly revenue.
↗️ Atlassian: Shares in the software company behind Jira and Confluence shot up 31% premarket following a revenue beat powered by accelerated growth in its cloud business.
↗️ Airbnb: The short-term rental company raised its full-year revenue forecast, citing growth in demand as it uses AI to improve its platform. Shares gained 7% premarket.
↗️ Maplebear: The company behind Instacart jumped 12% in premarket trading after posting higher revenue, boosted by higher order volume.
↘️ Sweetgreen: Shares fell 16% premarket after the salad chain said its second-quarter loss widened and it lowered its outlook as the cyclosporiasis outbreak weighs on demand.
🔎 Under Armour, Wendy’s, Vistra, Take-Two: The companies are among the names set to report earnings ahead of the opening bell.
One Big Chart
Reformation, fashion’s latest initial public offering, is full of buzzwords: Sustainability, data-driven design and fast manufacturing are just a few appearing in its filing. They might not be enough to keep its viral dresses from landing on the discount rack.
What I’m Reading
Ratings firm Egan-Jones, accused of grade inflation, vouched for $40 billion of insurer debt. (WSJ)Generative AI is steamrollering the once booming industry known as software-as-a-service. Companies are rushing to reinvent themselves. (WSJ)“Refine, baby, refine” is the energy industry’s new mantra. But America’s fuel-makers are maxed out amid a global fuel supply crunch. (WSJ)Texas’ light regulation and low taxes are luring dozens of big companies. It’s also setting up a water crisis and a “race to the bottom” in shareholder protections. (Barron’s)Anyone who bought this market “wizard’s” ETF has been essentially wiped out. (ETF.com)
Today in Markets History
📰 On this day in 1990, The Wall Street Journal published market guru Joe Granville’s forecast that the stock market would “crash within a few days.” The Dow barely budged, finishing the month at 2614 and soaring past 3200 by the spring of 1992.
Beyond the Newsroom
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About Me
Business and finance have fascinated me for a long time. Before writing this newsletter, I edited The Wall Street Journal’s Heard on the Street team for a decade, wrote two investment books and managed a team of stock analysts at a global investment bank.
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