Trader Talk

Inflation hawks muted after US payrolls check in soft

Job seekers line up to meet with recruiters during the Job Hunters Boot Camp in San Mateo, California.
Getty Images

After Friday's weak data, monetary policy hawks have a little less to crow about.

July's nonfarm payrolls data of 209,000 was below expectations of 230,000 though there were upward revisions in May and June. Meanwhile, hours worked remained unchanged. The result is a perfect combination of a disappointing but not statistically significant number. That should mute any dramatic move in interest rates.

Why is that good? Because there is near-unanimous agreement that the one factor that will force stocks into a correction is a sudden surge in rates. Modest moves up over time, with a slowly improving economy, is different. But if the 10-year yield goes from 2.6 percent to, say, 3.5 percent in a month, forget it—that spells correction.

More importantly, the factor that really matters, wage growth, is up only 2.0 year-over-year. That is below expectations of a 2.2 percent gain; separately, last month was revised down to 1.9 percent from 2.0 percent last month.

The bottom line is there are no wage pressures.That should mute, at least temporarily, any upward pressure on yields.

Pisani: Everything selling off
Pisani: Everything selling off

Personal Consumption Expenditures (PCE), a measure of prices changes in consumer goods and services, rose by only 1.5 percent year-over-year, unchanged from last month—another inflation indicator that has yet to show signs of blowing up.

Don't get me wrong: I'm not happy about the muted wage growth. I would be perfectly happy to trade higher wages for a flat to modestly down stock market. I view putting more coin in the average man's pocket as more important than keeping the S&P 500 at a record high, which looks fairly rich north of 1,900.

1) Now THIS is a hot initial public offering (IPO). In a week of mediocrity and sub-par IPO pricings, Mobily (MBLY), priced 35.6 million shares at $25. Just yesterday, The Israeli company had been seeking to raise 27.8 million shares in a $21 to $23 range, but that was already raised from $17 to $19. They make the software for collision avoidance systems.

That's $890 million raised, from about $500 million expected earlier in the week. Wow. The thinking, according to some, is that Mobily could be a hotbed for all the new sensor deterction technology.

Energy infrastructure spinoff VTTI Energy priced 17.5 million shares at $21, at the high end of the $19 to $21 range. Cancer biotech Loxo Oncology priced 5.2 million sharesmore than expectedat $13, in the middle of the $12 to $14 range.

2) China manufacturing output in July expanded at the fastest pace in a year and a half. Not to be outdone, U.S. manufacturing soared to its highest in three years.

--By CNBC's Bob Pisani