Wall Street Frontline｜Peter Cardillo Decoding the Current Market Landscape

Welcome to Wall Street Frontline.

Data released by the Bureau of Labor Statistics on September 5th showed the U.S. labor market added 142,000 nonfarm payroll jobs in August, falling short of the economists' expectations of 165,000. 

Additionally, according to ADP, private sector payrolls grew at their slowest pace in over three and a half years, with only 99,000 jobs added. This marked the weakest job growth since January 2021 and was well below forecasts. ADP's chief economist Nela Richardson noted that the job market is clearly trending downward after two years of rapid expansion.

On the other hand, on Tuesday, September 3rd, NVIDIA experienced the worst single-day loss in stock market history, shedding a staggering 279 billion U.S. dollars in value after a 9.5% drop in share price. Once riding high on the AI wave, with a valuation exceeding 3 trillion U.S. dollars, NVIDIA is now facing investor skepticism as the U.S. economy shows signs of strain.

So how is the volatility in the technology sector influencing the broader market? And what do the recent employment figures reveal about the overall health of U.S. labor market? Today, we are joined by Peter Cardillo, Chief Market Economist at Spartan Capital Securities, to delve into these critical questions.

Wall Street Frontline: So first of all, this week's stock market is very volatile, what are the main drivers behind this market fluctuation?

Peter Cardillo: Well, I think there are several factors. The first factor is obviously technology has been driven down by NVIDIA. And of course, the other factors have been macro indicators. And we did receive the August labor report, it was weaker than expected, although I was looking for 116,000 non-farms, it came in above my expectations. But certainly, consensus-wide, it was lower. And I think the real fear here is that for the second month in a row, we've had downward revisions, which means that the labor market is probably weaker than what the numbers are telling us. And that's creating a fear factor in the market of where we might be headed in terms of a soft landing. 

Wall Street Frontline: So, in the next couple of weeks, what will be the important factors to watch for stock market?

Peter Cardillo: Well, next week, we have CPI, and I'm expecting for a lean number. And if that's the case, that may still open the path for a 50-basis point cut. Although I do admit that today's employment data probably will lead us to a quarter of a point rate cut. But I think, you know, the Feds might have to rethink.

In fact, there were two fed members today that expressed their opinion, Williams, who said that, you know, it'd be good to start with a 25-basis point reduction. And Waller said that he's open to a larger cut. So I think the inflation numbers coming out next week will be the determining factor whether we get 25 or a 50 basis point cut.

Wall Street Frontline: As you just mentioned, the technology sector has experienced a lot of volatility, especially in these recent two months. So what is your long-term outlook for the technology sector?

Peter Cardillo: Well, I don't talk about sectors, but I can tell you that my long-term outlook for the remains positive. You know, even if we were headed for some sort of negative economic activity, I don't think it would be a severe and prolonged period of negativity. And it probably wouldn't happen until the latter part of 2025.

So I think, you know, once we get through this September blues, I think stocks will begin to respond. And they'll respond because, you know, rate yields have come down. But now what rate cuts in sight, that means that the consumer will be getting some real quick short-term relief. Payments of credit cards and loans and things of that nature will be less expensive. So to borrow money becomes less of a burden for the consumer.

Wall Street Frontline: As you just talked about, right now the market consensus is that in the middle of September, the Federal Reserve will start cutting interest rates. Right now, the Wall Street is debating whether it's going to be a 25 BPS or 50 BPS cut. What is your viewpoint? Do you think it's going to be 25 or 50 BPS?

Peter Cardillo: Well, up until today's report, I thought there was a good chance that we'd get a 50 basis point cut. But I kind of think that the Fed is not, doesn't want to panic Wall Street. And so I think they're going to cut by 25 basis points based on today's employment data. Now if, on the other hand, we should see, which I don't think is going to happen, but if we should see a negative report on inflation, that could put a 50 basis point cut back on the table. But based on today's employment data, I think we're looking at 25. Now that does not exclude the fact that somewhere along the line between November and December, that the Fed will probably cut by 50 basis points. So basically looking at 75 basis point reduction for the remainder of the year.

Wall Street Frontline: How many rate cuts do you think there will be?

Peter Cardillo: I kind of suspect we're looking at a total of about 150 basis points.

Wall Street Frontline: 150? That's very aggressive.

Peter Cardillo: Which means, 75 in 2024 and three rate cuts in 2025.

Wall Street Frontline: So right now, do you think inflation or the labor report data, which one is the priority for the Federal Reserve?

Peter Cardillo: Well, we know that inflation is going in the right direction. So the Fed has indicated that and has said that. But they are worried about the employment. In fact, you know, Powell at the Jackson Hole meeting stressed the need not to weaken the labor market to the point where we could be looking at negative jobs growth. So I think that's their biggest priority.

Now, let's go back to the employment data, if you factor in the revisions that we had today, as I said before, the labor market is weaker. And so I think the Fed is going to really focus on that. And of course, you know, we'll probably get another revision downward for September.

Wall Street Frontline: The last question is about gold, because gold prices climbed to nearly a one week high on Thursday, driven by a weaker U.S. dollar and declining yields. With the market now betting on a potential maybe like 25 to 50 BPS rate cuts by the Federal Reserve, how do you see gold prices moving forward?

Peter Cardillo: I think they're going much higher.  I think we're looking at there's a good chance we could get to $3000 in the next quarter. You know, from a technical perspective, gold has been doing quite nicely. It's been quite volatile, you know, in a sense that it seems to drop to the $2520 area and then goes back up to that $2560 area, having a hard time getting above that $2600. But there's a lot of demand. And if you look at the inputs from the ETFs, they've been very strong for nearly two quarters. So that suggests that there's a lot of buying power out there.

出品：南方财经全媒体集团 

栏目策划：于晓娜

栏目统筹：向秀芳

出镜记者：周蕊 

翻译&制作：周蕊 段伊航（实习生）

设计：林军明 廖苑妮