The Market Today

CORONAVIRUS UPDATE (Chartbooks: Vining Sparks Coronavirus Chartbook and Vining Sparks Coronavirus State Charts)

Health officials, policy makers, economists, and markets will continue to monitor the U.S. pandemic as outbreak statistics persist in the wrong direction. Cases have continued to climb across the country. The 7-day average for new cases rose above 108k over the weekend, a six-fold increase from a month ago and the highest level since early February. Based on data from the CDC, hospitalizations are rising across age cohorts and are roughly half of their peak from early January. And while deaths remain notably lower than in the prior three virus waves, the most recent trendline has turned up. For some important context, a significant majority of the worst health outcomes are affecting the unvaccinated and the number of new shots has ticked higher.

 

TODAY’S ECONOMIC NEWS

Today’s only economic report will be released by the BLS at 9 a.m. CT and is expected to show another increase in job openings in June to another all-time high of 9.27mm. Last week’s nonfarm payroll report showed a strong month of hiring in July reduced the ranks of the unemployed to 8.7mm (9.48mm in June). A ratio of roughly one unemployed worker for every one job opening is highly unusual considering the economy’s proximity to a historic recession and loss of employment, highlighting tensions between labor supply and demand.

Also of interest later today will be comments from a couple of Fed officials who will vote on policy decisions for the rest of the year. Atlanta Fed President Bostic is scheduled to make public remarks at 9 a.m. CT, followed by Richmond Fed President Barkin at 11 a.m. CT.

ECONOMIC CALENDAR FOR THE REST OF THE WEEK

The rest of the week is relatively quiet, with a key report scheduled for Wednesday. The NFIB will announce the results from its latest Small Business Optimism Survey on Tuesday and the University of Michigan will release its preliminary Consumer Confidence Index for August. Key to those reports will be any indication of whether the current COVID-19 outbreak caused by the delta variant is impacting sentiment. Wednesday’s CPI report, however, has the potential to more directly impact monetary policy decisions. Headline CPI inflation is expected to inch down from 5.4% to 5.3% while core is expected to cool from 4.5% to 4.3%. Thursday’s Producer Price Index inflation report may also garner attention.

In Washington, infrastructure spending will remain in the headlines. The Senate took a procedural step closer to bringing the bipartisan plan up for a vote, potentially as soon as late this evening. House Speaker Pelosi has said she won’t bring the bill up for consideration unless the Senate also passes the larger multi-trillion package that includes additional presidential spending priorities. Senate Majority Leader Schumer indicated he plans to quickly move on to the larger bill, which Senate Democrats hope to pass through reconciliation, bypassing Republican opposition.

TRADING ACTIVITY

Market Caution Evident Monday as Delta’s Global Spread Casts Shadow over Strong Jobs Report: Last Friday’s strong U.S. jobs report (more below), which boosted U.S. equities to a record and lifted longer Treasury yields, has had little positive impact on most global markets Monday. The prospects that the labor data could strengthen the Fed’s tapering plans was blamed as the likely culprit behind an overnight flash crash in the price of gold and continued strength in the Dollar. Gold was 1% lower at 7 a.m. CT but had plunged more than 4% shortly after global trading opened to a more than four-month low. The Dollar was holding most of Friday’s jump, adding to downward pressure on oil prices from concerns the delta variant driving global cases higher could interrupt the recovery for global demand. Global crude prices were down more than 3%. More broadly, however, European equities were generally weaker after a mostly positive day of trading in Asia., remained a headwind. Futures tracking the Dow and S&P 500 had pulled back 0.3% and 0.1% from record levels just before 7 a.m. Treasury yields were lower, but still above last Thursday’s levels prior to Friday’s payroll report. The 2-year yield was 0.6 bps lower at 0.20% and the 10-year yield had declined 2.4 bps to 1.27%.

NOTEWORTHY NEWS

ICYMI: August 6, 2021 Weekly Market Recap – 10-Year Yield Recoils From Near Six-Month Low as Strong Jobs Report Keeps Tapering Talks on Track: Longer Treasury yields fell to their lowest levels in nearly six months on Wednesday after the ISM’s Manufacturing Index dropped unexpectedly and ADP’s 330k estimate for private payroll growth in July missed expectations widely. However, just hours after the disappointing labor market report pushed the 10-year yield down to 1.1258%, its lowest intraday level since February 11, the ISM’s Services Index handily beat expectations. Strong fundamentals, including a positive reading on employment, pushed the headline PMI to a record high of 64.1. The move higher from Wednesday was extended Thursday following a positive jobless claims report and accelerated Friday after the official payroll report beat expectations. Total payrolls rose 943k in July, inflated by seasonal adjustment issues for local education jobs and topping expectations for a 870k gain. Even stripping out the statistical skew, however, private payrolls rose by a strong 703k, in line with expectations and led again by leisure and hospitality hiring. Echoing the broader strength, the unemployment rate fell from 5.9% to 5.4%, the employment rate rose from 58.0% to 58.4%, participation improved 0.1% to 61.7%, hours worked stayed elevated, and wage growth remained firm. The solid jobs report is likely to keep the Fed’s tapering discussions on track. For the week, the S&P 500 added 0.9% and closed Friday at a record high. The 10-year Treasury yield added 7.5 bps after a 7.4-bp increase on Friday. Click here to view the full recap.