NFP Jobs Report, Gold Breakout & AI Productivity | What Investors Need to Know | Kenny Polcari

Well, good morning. Yes, it's me, Kenny Polcari, your host of the party. And today is Friday, August 7th, 2026. And here are the things that you need to know to get your day started. Well, investors spent yesterday kind of digesting the recent rally. Oil, it pushed higher on renewed Middle East concerns. Yields pushed higher as well, once again testing the upper end of the range. And today it's all about the non-farm payroll report. What are we having dinner tonight? Well, We're gonna have the chicken scarappiello, and we'll talk about that in a moment. So like I said, stocks took a breather yesterday. Nothing dramatic, just the market repricing the geopolitical risk premium as higher oil prices and rising Treasury yields gave investors an excuse to lock in some profits. At the end of the day, the Dow lost, uh, 464 points. The S&P's down 20. The NASDAQ lost 15. The Russell gave up 19 points. The Transports lost 150. The Eagle Weight S&P lost 17 points while the Mag 7 added 85 points. Of the 11 S&P sectors, only 3 advanced. Energy up 1.5%, healthcare up 0.2%, and communications was up 0.3%. The other 8 sectors ended the day a little bit lower, with basic materials, industrials, and real estate really the biggest losers, all down about 0.9%. We saw more weakness in homebuilders, down nearly 2%. Retail is down 1.7%. Airlines lost 2.5%. Disruptive tech was down about 6/10. Metals and miners lost 1.5%. Cybersecurity names were down 1.2%. On the upside, semis rose 3/10. Big Pharma was up 7/10, and all of the contra trades ended the day higher. The PSQ was up 3/10. The SH was up 2/10, and the DOG was up 9/10 of a percent. The triple levered SPSX, that was up a half a percent. The only one that didn't participate was the VIXI, right? It lost 1.2%, and that's because the VIX, which is the fear index, ended the day lower, down about 4.25%, suggesting that the anxiety that we've seen out of the Mideast is beginning to become a little bit less. So the broader market does not appear to be reacting to every geopolitical headline, which makes sense, right? It's been dragging on for too long. Remember, political, geopolitical headlines are great at causing short-term chaos and ultimately opportunity, but rarely do they price stocks in the long term. Okay, so what gives? Oil pushed higher yesterday, WTI 3%, even as Iran suggested a deal with Oman to reopen the Strait of Hormuz may be getting closer, which makes you ask, well then why did oil go up 3% and not down 3%? Great question, and here's the answer, and it is specific to oil. It is renewed flare-up in geopolitical tensions. Iran and Oman are supposedly near a deal, but Um, it leaves us asking whether or not it's going to really reduce the risks in the strait. Reports— because then reports emerge that Iran is trying to restrict and prevent U.S. and Israeli ships from using the strait while at the same time demanding compensation from countries it considers hostile, which they conveniently left undefined. Add reports of new military activity and suddenly algos decided that the geopolitical risk premium for oil wasn't going away. Toss in the ongoing threats and attacks on the Saudis by the Houthis and boom, there you go. At the same time, Treasuries got whacked. The TLT and TLH both lost about 6/10 of a percent, sending the 10-year Treasury yield up 5 bps to end the day at 4.66%, ever closer to that 4.7%. The 30-year gained 4 bps to end the day yielding 5.21%. Then came the economic data, which, by the way, was more good than bad. Unit labor costs fell more than expected. That's a positive. While labor productivity surged, and that's good as well. Exactly what the Fed wants to see, right? But instead of focusing on that, traders and the algos fixated on those higher oil prices and rising yields. Remember, when in doubt, it's always easy to hit the sell button and lock in some of those short-term profits than it is to stick around and kind of wait for the dust to settle. Now here's the important part. Unit labor costs didn't decline because, uh, workers are earning less. They declined because workers are actually becoming more productive. Businesses are generating more output per hour worked, which means the labor cost embedded in every product, every service, every dollar of GDP is falling. That's good disinflation. It is not disinflation through layoffs or a recession., but it's through stronger productivity and improving efficiency. And that's a win-win for corporate America, consumers, and ultimately the broader economy. And here's what you really need to consider: if productivity is going up because AI-driven efficiencies are finally beginning to show up in the data, then this may be the first glimpse of a much bigger trend. Better productivity is always the best way to grow the economy without reigniting inflation. But that argument, the good economic data argument, fell on deaf ears, and, and, uh, the algos and the trader types decided to take money off the table, which is really not a surprise considering the recent red-hot rally that some would define as— and don't forget, they're not investors, they are traders. They trade for minutes or maybe hours, but never for weeks and months, and never mind years, as they try to capture fractions of a penny millions of times a day. And I know it doesn't sound like much, but those pennies actually become real money. Now here's the irony in all of this. The same AI that's helping companies become more productive is also powering the trading systems that ignored the productivity story altogether. Now isn't that a slap in the face? Because have you seen this TrueTrade.io commercial? If you haven't, you have to watch it. Because you don't have to do anything. The tagline says it all, quote, don't have the time, don't have the trading experience, it doesn't matter. The understanding here is that the computer will do it for you. Okay, let's move on. Yesterday's earnings reinforce what we've been talking about all week. The winners are the companies proving that they can still monetize AI, right, or supply the infrastructure that AI requires. The losers, well, they're the companies that investors expected more than management delivered. Memory chip makers are the perfect example. SanDisk lost 6%, dragging the whole, uh, DRAM ETF, uh, down, right? That lost 4.5%. Cybersecurity is still growing but not fast enough to justify the premium. So Fortinet, well, it lost 2.5% while the cybersecurity ETF lost 1.2%. Meanwhile, energy companies continue to print cash. Uh, COP gained 1.5%, right? ConocoPhillips. Um, and any companies tied to the generation of, of, of power are benefiting from the massive electricity demand created by AI. Today we're going to hear from Under Armour and TTWO, two non-events. The real story today is the July NFP report that hits the tape at 8:30. And here's what you— what we expect, right? New jobs created up 80,000. Unemployment to remain at 4.2%, which is historically low, while average hourly earnings remain unchanged. The other data point that's going to be important is the labor force participation rate, which is expected to tick up to 61.6%, up from 61.5%. Now, the labor force participation rate measures a percentage of the civilian population aged 16 and older that is either working or actively looking for work, and is considered one of the best measures of the economy's labor supply. If it rises, that's generally good news. It means, uh, companies have larger pool of workers to hire from, which helps keep wage inflation in check. If participation falls, then the labor pool shrinks, employees have to compete harder for workers, wages rise, and that can keep wage inflation elevated. The sweet spot today, anywhere between 70,000 and 100,000 new jobs, unemployment to hold steady at 4.2%, and the increase in the labor force participation rate. If that happens, it's going to give Kevin Warsh and the FOMC committee one more reason to stay patient. More than 100,000 new jobs will be viewed as too strong, while less than 70,000 jobs is going to be considered soft. But just for perspective, the US economy only needs to create 35,000— 35,000 jobs per month to keep pace with population growth and normal work forced turnover. Think of it as the breakeven point. At that level, the labor market is neither expanding but nor is it shrinking. And the key now is yesterday's productivity report changes that conversation again. If businesses are becoming more productive because of AI and technology, the economy doesn't need to create 200,000 jobs a month to keep growing. Stronger productivity means that slower job growth can actually support a healthy economy. While keeping inflation under control. This morning, oil's a bit lower, down 15 cents. Bond yields are holding steady, but gold— now that's very interesting. It's finally broken out of the trading range that we've been stuck in for the past 7 weeks. On Wednesday, gold pierced trendline resistance at 4,160 and then blasted through the upper band of the trading range that we have identified, which was 4,200. This morning it's up another $73, trading at $4,312. Now yes, there's still geopolitical anxiety in the Middle East, and yes, inflation remains part of the conversation, but this move is being— this move in gold is being driven by the breakout itself. Once we broke, once we pierced resistance that we broke up and through, the Momo guys and the algos, they went to work triggering additional buying and confirming what the chart has been saying for days. Resistance now becomes support on the way back down. So any pullback, we hope, finds support right there at the 4160, 4200 range, with the ultimate upside right now at 4500, which is the long-term trend line. European markets this morning are ticking higher as we move into the weekend. US futures are ticking a bit higher as well ahead of today's NFP report. Uh, now up 12 points, the S&P's up 10, the NASDAQ's up 120, while the Russell is up 6. The S&P closed at 7709, right? I think we need to churn a bit here right before the market wants to move higher. Now, the chart does suggest that we could test 7900, 8000 before the end of this month. And remember, it's August, volumes are lower, and that could amplify the move in any direction. So yes, it could happen, but we could easily retest 7600 as well. Right, it's all going to depend on the data that we get over the next couple weeks, and that's exactly why you need to stay disciplined and true to your plan. Let me remind you, chasing excitement has never been a successful investment strategy. Remember, you're invested, you are participating. Let the market do the work for you. Don't get FOMO-ized, stick to the plan. If you'd like to discuss these goals, evaluate the risk in your portfolio, or simply just get a second opinion Give me a call at 561-931-0190. Better yet, you can click on the link in my note, which is just slatestone.com, and then click on the Connect Contact Us page. I'm always happy to help and provide a complimentary portfolio review and risk assessment for you. Okay, so now what do we have for dinner tonight? We're gonna have the chicken scarappiello, right? This serves about 4 to 6 people. So just like investing, scarappiello is all about diversity and balance. The richness of the chicken, the spice of the sausage, the acidity of the wine and the tang of the cherry peppers. On their own, each ingredient is good. Together, they become something, well, unforgettable. That's the beauty of both investing and cooking. In this case, Italian cooking. You can't— you don't judge the individual pieces. You appreciate how they all work together, right? Now for this, you're going to need the bone-in, skin-on chicken thighs and a mix of thighs or drumsticks. That's what you want, right? Salt, pepper, olive oil, sweet Italian sausage. You can use hot, I use sweet. One large red, one large red, one large green bell pepper sliced, one large onion sliced, 5 cloves at least of garlic sliced, 8 to 10 cherry peppers. You're going to cut them in half. And you need 2 tablespoons of the cherry pepper brine, right? Now for the sauce, you need a cup of dry white wine, 1 cup of low sodium chicken stock. You need butter, oregano, thyme, rosemary, the juice of a half a lemon, and fresh parsley. You want to begin by seasoning the chicken with salt and pepper. Heat up the oil in a large Dutch oven or cast iron skillet, something that goes in the oven. Brown the chicken skin side down first until it's nice and golden. It's about 5 or 6 minutes, and then you're going to remove it. Next, you're going to cook the sausages in the same pan, or better yet, I grill the sausages, right? Don't cook them completely, but then take them off and then slice them into just bite-sized pieces and set them aside. Now go back to that pot, add the onions and the peppers, sauté that for 5 minutes, add the garlic, deglaze it now with the white wine, scrape up every bit on the bottom of the pan, don't waste it, then reduce that by half. Now you're gonna add in the chicken stock, the oregano, thyme, rosemary, cherry peppers, and the pepper brine. Bring it all to a simmer, right? Next, you're gonna add back the chicken and the sausage, you're gonna cover it, bake it in the oven at 375 for about 40 minutes. Then you're going to remove the lid and cook it for another 15 minutes, skin side up, right? Finish it with the butter and the lemon juice and the chopped parsley. Taste and adjust it if you need it for salt and pepper. Bang, there it's done. You can serve that with a large mixed green salad. That's really all you need because you've got the, you got the chicken, you got the sausage, you got the veggies, and then you got a big green salad. I'd enjoy that with a, a nice glass of wine. It is summertime, so you can go for a nice light rosé, you go for a white wine, or even a light red maybe something like a Chianti. You don't need something really heavy like you would with steak. Um, I would tend to, I would tend to go on the lighter side on however you decide. In any event, it is Friday here in Florida. It looks like it's going to be kind of an overcast, crummy day, so we'll see what that says about the market. Until Monday, I'll be in New York City. Uh, I'll be on, uh, in New York City all week next week. You'll see me on Fox Live in studio. So until then, take good care.