Market Snapshot September 6, 2019


Good Morning on this fantastic Friday,


Great piece from Dan Rawitch today that is worth sharing:


This morning’s payroll numbers were terrible. Job growth slowed more than expected with 139,000 new jobs vs forecast of 158,000. Temporary census workers added 25,000 to growth. Unemployment 3.7% for 3rd month and 571,000 entered labor force. Average hourly wage increased highest since Feb. Annual increase 3.2%, above 3.0% for 13th month. Individuals who want to work but have given up and those working part-time because they cannot find full-time, increased to 7.2% for 7.0% in July which was lowest in 18 years. Even worse is that the last two months numbers were revised to the downside. On a more positive note, hourly earnings did come in better than expected. Normally, a jobs report like today would drive bond prices up and stocks down. The opposite is happening and the reason is silly. Because we have declining job growth, the stock market is excited because they think this will force the Feds hand with regards to easing rates. This is what happens when the Fed allows the market to become addicted to crack. All the market can focus on is when the next crack injection will be administered. More crack at this point is like putting a full helium balloon back on the nozzle and pumping in more helium. It works until the balloon explodes in your face. We have a bearish looking chart with a failed head and shoulders pattern. We need the MBS to close above 102.75, Powell speaks soon and ANYTHING can happen at that point.


The 10-yr has improved a bit and is 1.54%. Mortgage bonds are floating between unchanged and down a dozen. We should be better than that (I guess that is a universal statement).


The WSJ shared that uncertainty over trade policy is likely to reduce U.S. economic output by more than 1% and curtail growth by 1 Trillion (that is with a T, folks) through early 2020, new research from Federal Reserve economists suggests. I was not expecting the trade war to be as costly… Yikes. For perspective, the Iraq war will ultimately cost U.S. taxpayers at least $2.2 trillion. Because the Iraq war appropriations were funded by borrowing, cumulative interest through 2053 could amount to more than $3.9 trillion. That is over 50 years, not just one with the trade war…


Mr. Powell is speaking in Zurich and according to him, everything is sunny and 70. No recession on the horizon. I hope you, as I do, feel better now.


I am likely to float locks until next week but will depend on where we close. If up from here, I will float.
Enjoy the weekend and first, make today great.