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Market Snapshot 7/3/24 – Data Out Again

Good Wednesday morning from your Hometown Lender,

Data out today was again, weak.

ADP payrolls came in very low at 150k. unemployment claims (typically a Thursday print but released a day early with the holiday) in higher at 238k, Factory orders in at minus .5% and ISM Services are now in contraction territory. This all follows the same narrative of a slowing economy. Chairman Powell made it clear yesterday in Portugal he sees the same reports we see.

Bonds though have not done well over the past week. Why?

Markets are starting to price in a Trump victory and with-it expectations are that inflation may be sticky not allowing the Fed to cut as much. More on that from the WSJ below. I do still see the trajectory of rates is lower but it there will be a few more stops on this train than previously thought. The ten-year note has reacted positively on the news with the yield down at 4.36% today. We will not see much in the way of better mortgage pricing though with markets closed for the holiday tomorrow and the jobs report being released Friday before markets open. As I typically share, floating into a big news event is not recommended.

The increasing likelihood of a second Trump administration has helped spark a steep selloff in U.S. government bonds, with investors betting policies including tax cuts could drive up deficits and inflation. Treasury yields, which rise when bond prices fall, started surging June 28, a day after a debate between President Biden and former President Donald Trump that Wall Street viewed as delivering a major blow to Biden’s re-election chances. A poor showing from Biden could also help tip control of Congress to Republicans, creating more space for their budget priorities.

“Something obviously changed pretty quickly on Friday,” said Dan Mulholland, head of rates trading and sales at Crews & Associates. Investors, he said, are assessing “how we’re going to move forward after the Thursday debate, and I think there have been some pretty big bets that have been placed.” A rule of thumb on Wall Street holds that budget deficits tend to be larger under one-party control. Many investors think that elevated deficits have already played a role in driving up Treasury yields in recent years by increasing the supply of bonds that the market must absorb.

Stay safe, Happy 4th, and first, make today great!