Market Snapshot September 5, 2019

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Good Morning on this Terrific Thursday,

 

It’s all about the trade news. The Dow is up 450 points because China and the US are supposedly going to meet in October. Bonds are getting beaten up for now. The 10-yr is at 1.58% and mortgage bonds are off 35bps. We are definitely seeing a shift to a “Risk On” strategy which favors stocks for the moment. When the trade meetings fail or get cancelled, this will reverse.

 

There was a good amount of economic news as well today: ADP jobs report came in at 195,000 private-sector new jobs vs forecast of 150,000. Jobless claims 217,000 versus forecast of 213,000. Nonfarm productivity increased 2.3% vs forecast 2.2%, manufacturing decreased 2.2% – worse since 3rd quarter 2017. Factory orders increased 1.4% vs forecast 1.0%. Services sector PMI 56.4% vs three-year low 53.7% last month, 16 of 17 industries expanded, over 50% is expansion and over 55% is exceptional. Is this the case for the Fed to pause on a rate reduction? Nope not at this point.

 

Tomorrow gives us the biggest data set of the month with the jobs report. With the damage being done in the bond market today, I am less concerned on what would happen with a strong print tomorrow. The market is expecting about 160k jobs. Last month was 164k with the unemployment rate at 3.7%. In the end, the number to watch in the report is the hourly wages. If those tick up, so does inflation. Markets are expecting a .3% increase which seems on the high side. It is always daunting floating into the jobs report but if you haven’t locked yet, even with a strong report tomorrow, today’s losses should cushion the blow. A big headline number tomorrow could impact the Fed rate decision in two weeks.

 

Make today great!