Stocks higher on debt Band-Aid, falling energy prices, and labor market progress, bitcoin profit-taking

US stocks are rising after jobless claims shows the labor market is heading in the right direction again, global energy crisis fears ebb, and as investors remain upbeat that the US won’t default on its debt after Democrats accept the Republican’s short-term debt limit extension.  The outlook for 2022 remains optimistic given markets are still expecting Democrats to ultimately deliver infrastructure spending and President Biden’s economic plan by December.  Senate GOP leader McConnell’s chess move was brilliant as it puts all the pressure back on the Democrats and will likely raise the chance that Democrats might run out of time in delivering more spending and tax increases.

Jobless claims beat estimate, NFP looms

The last appetizer to Friday’s nonfarm payroll report was a positive weekly jobless claims report.  As the US continues to get the Delta variant spread under control, the labor market recovery should continue to improve.  Jobless claims fell more than expected to 326,000, a beat of the 348,000 consensus estimate and upwardly revised 364,000 prior reading.  Continuing claims improved to 2.714 million, which was much better than the expected drop of 2.766 million.

The number of Americans participating in any unemployment insurance programs continues to fall, down 854,638, which shows there is still momentum behind last week’s eye-dropping 6.2 million drop.  The total number of Americans receiving some kind of benefit is now 4.1 million, which will raise the question will the 7-million Americans that are no longer receiving benefits be incentivized to return to the workforce.  The upcoming nonfarm payroll report could surprise to the upside given the strength behind the ISM manufacturing/service reports and the strong ADP private payroll reading.

Expectations are for 500,000 jobs created in September’s nonfarm payroll report, but traders should not be surprised if that headline comes closer to a 1-million.

Bitcoin

Bitcoin mania is taking a break as profit-taking kicks in.  October has been a great month for bitcoin and eventually that momentum will spill over to the other top cryptocurrencies.  Once the rally in altcoins is complete, the next big move for bitcoin may stem from investors looking for protection away from equities.  The downside risks for US stocks going into year-end could lead to significant inflows for bitcoin.

Hedge funds and money managers who have not had strong performances over the first nine months of the year may look to crypto to beef up their end-of-year numbers.  Institutional traders can’t overlook bitcoin mania as that market cap is back over USD 1 trillion and Ethereum’s dominance this year as the best-performing asset brings a 386% gain.

Bitcoin profit-taking could trigger a move towards USD 52,000 but that should provide short-term support.  Bitcoin’s path to USD 60,000 is there, but it might not happen as quickly as altcoins will likely steal the spotlight here.

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