The Market Today
Important Week for Policymakers and Economic Calendar
by Craig Dismuke, Dudley Carter
4Q ECONOMIC OUTLOOK WEBINAR – Thursday September 7, 2021 at 10:00 a.m. CT (Register Here)
Vining Sparks will host our 4Q Economic Outlook Webinar on Thursday. The Delta wave has had a muted impact on economic activity relative to the first two waves. However, imbalances have formed across multiple aspects of the U.S. economy during the recovery and expansion. One outworking of these imbalances has been the sharp, and surprising, rise in inflation. We will dig into the details of these issues during our presentation, along with how we expect these issues to affect future interest rates.
TODAY’S ECONOMIC DATA
Kicking off Important Week of Data and Fiscal Policy Discussions with Factory Orders and Fedspeak: This week will conclude with the September jobs data on Friday which will either bolster concerns from August’s disappointing report or highlight a resilient labor market during the Delta wave. Markets will remain glued to negotiations in Washington over lifting the debt ceiling, the both infrastructure packages, and eventually funding the government on a longer basis than last week’s stopgap solution. In the meantime, there are a number of important economic reports on the calendar this week, including the August factory orders report at 9:00 a.m. CT. St. Louis Fed Bank President Bullard is also scheduled to speak at 9:00 a.m.
Equity Markets Limp into the New Week as Sovereign Yields Inch Up Again: Global markets have remained lethargic in the first couple of days of October as the list of uncertainties that led to sharp declines for risk assets in September has lingered into the fourth quarter. While Chinese markets will be closed for most of the week for a holiday, worries about the health of Evergrande, a major property developer in China, and the property market more broadly were back in the headlines Monday. The Company’s stock was halted for trading in Hong Kong following reports of a sale of a majority interest in one of its subsidiaries. Hong Kong’s Hang Seng slumped 2.2% to lead mixed results across the region. European markets were also subdued, trading close to flat after a wobbly morning session and following an unexpected October cooling in investor expectations for Europe’s economy. The index dropped for a third month in a row and, while still solid historically, marked the lowest level since April. U.S. equity index futures were off by more than 0.3%. Helping further curb enthusiasm in equity markets, sovereign yields in Europe and the U.S. rose again after tailing off late last week. Friday’s payroll report could provide a greenlight for Fed officials to move forward with plans to taper asset purchases as they seek to begin normalizing policy to control faster inflation. Just before 7 a.m. CT, the 10-year U.S. Treasury yield was 2.3 bps higher to 1.48%, the 5-year yield was 1.5 bps higher at 0.94%, and the 2-year yield had added 0.6 bps to 0.27%.
ICYMI – October 1, 2021 Weekly Market Recap: Treasury yields rose steadily on Monday and Tuesday, extending a climb that began the week before after the Fed signaled it planned to announce its tapering plans in November and could raise rates as early as next year amid a higher inflation forecast. Last Wednesday, Fed Chair Powell acknowledged that supply constraints appeared to have worsened on the margin and were likely to carry over into 2022, keeping inflation firmer for longer. The ISM’s Manufacturing Index improved, but slower supplier deliveries contributed the most to the gain. The same ISM report was full of comments about hiring concerns. The weekly jobless claims data showed the first major effects of the expiration of federal benefits on September 6 which many hope will loosen up labor supply, with 6.5 million people falling out of the PUA and PEUC programs. Consumer confidence was disappointing in both key reports for September. Personal spending rose slightly more than expected, but inflation took a chunk out of nominal spending and Delta limited some services activity. Personal income growth moderated as wages rose at the slowest pace since February, not surprising considering the hiring slowdown in August, and unemployment transfers declined. On Thursday, equities wrapped up their worst month since March 2020 with fiscal uncertainty weighing. A stopgap funding bill passed Thursday preventing a shutdown on Friday, but the debt ceiling looms and fiscal spending plans are stalled. Click here to view the full recap.