Brunch on Wall Street: Jobs or Earnings? (undefined: NKE)

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Economists expect 144,000 jobs added in September. (0:29) Nike can rip off the Band Aid. (1:49) OpenAI losses. (3:30)

The following is an abridged transcript:

This week asks a tough question about what the stock market cares about. The economy or corporate earnings.

Usually, the monthly jobs report would be a no-brainer for a headliner. But with tepid core PCE inflation data on Friday and no Fed meeting in October, investors may be looking for gains — however weak.

Right now, the market is pricing in a little more than a 50% chance that the Fed will cut rates again by 50 basis points in November. But with more inflation and jobs data to come before the decision, the FOMC can afford to bide its time.

Bellwether Wealth’s Clark Bellin says Friday’s core PCE print was “another data point that shows interest rates don’t need to be that much higher than the inflation rate.”

“Many investors may still be holding too much cash due to the attractive returns in the money markets over the past few years, but as the Fed cuts rates, we think it’s important for investors to think about a strategy for redistributing that cash to the markets.” over time.”

In the jobs report out Friday, economists expect nonfarm payrolls to rise by 144,000 in September. The unemployment rate is expected to remain at 4.2 percent, with average hourly earnings rising 0.3 percent on the month.

While the labor market was the main concern about the health of the economy, the Fed’s decision came with a half-point cut to start the easing cycle, providing an opportunity to look at corporate earnings.

And while earnings season is still a week away, there are big numbers from Nike (NYSE: NKE) before. And investors will pay attention to the goddess of victory.

The sportswear giant is expected to report a year-over-year decline in revenue of 8.5% to $11.65 billion, driven by weakness in North America.

Footwear revenue is expected to decline 9.4% during the quarter, and apparel revenue is expected to decline 7.9%. Nike is also expected to reveal a gross margin rate of 44.4%, operating income of $882.1 million and EPS of $0.52.

Nike shares have been in rally mode following the recent announcement that Elliott Hill is returning to the company to be the new CEO. Hill has a staff meeting planned for Oct. 14, his first day on the job.

However, before Hill takes the reins, analysts are wary that Nike could rip off the Band-Aid with FQ1 and the full-year guidance update to shake up investors. The company frequently issues its guidance during the earnings conference call and provides in-depth insight by region and product type.

The update from management on trends in China will also be closely watched by other consumer companies with greater exposure to the nation, including Starbucks ( SBUX ), Estee Lauder ( EL ) and Skechers ( SKX ).

Also on the earnings calendar, Carnival (CCL) reports Monday.

Nike joins Paychex (PAYX), McCormick & Company (MKC), Lamb Weston (LW) and Cal-Maine Foods (CALM) on Tuesday.

Levi Strauss ( LEVI ), RPM International ( RPM ) and Conagra Brands ( CAG ) are stepping in on Wednesday.

Constellation Brands (STZ) rose on Thursday.

In news this weekend, OpenAI is expected to lose about $5 billion this year, despite generating about $3.7 billion in sales, as the firm behind ChatGPT struggles with rising costs.

First reported by The New York Times, the figures also indicate that OpenAI, one of Silicon Valley’s hottest tech startups, plans to generate $11.6 billion in revenue next year and $100 billion dollars in 2029, with aggressive price increases planned for ChatGPT.

By the end of the year, the company expects to raise ChatGPT’s monthly fee by $2 to $22 before increasing it to $44 over the next five years.

But OpenAI is expected to remain in the red this year, driven by costs related to running its services, employee salaries, office rent and other expenses.

And in the Wall Street Research Corner, Goldman Sachs rebalanced its basket of 50 stocks with the highest expected return on equity.

Strategist David Kostin says the median stock in the basket expected ROE of 15% versus 2% for the median S&P 500 stock.

Stocks include Netflix (NFLX), Electronic Arts (EA), Tesla (TSLA), Tyson Foods (TSN), Coterra Energy (CTRA), International Paper (IP), Humana (HUM), Southwest Airlines (LUV), Super Micro Computer (SMCI) and Dominion Energy (D).