The Market Today
Markets Unreactive to G7’s 15% Global Tax Proposal
by Craig Dismuke, Dudley Carter
Quiet Start: Today’s calendar is quiet with only the April Consumer Credit Report scheduled for 2:00 p.m. CT. There are several important reports later this week including tomorrow’s Small Business Confidence Report and Job Openings and Labor Turnover data, and Thursday’s CPI inflation figures.
24 HOURS OF MARKET ACTIVITY
Rates Inch Higher Monday After Rallying Lower Friday on Another Softer-Than-Expected Jobs Report: U.S. equity futures were essentially flat at 6:45 a.m. CT Monday amid a quiet-and-mixed global session and Treasury yields had edged higher and steeper. The rise in yields, however, only partially unwinds a sharp, flattening decline last Friday after another softer-than-expected jobs report (more below). With the report intensifying debates around what has caused a hiring slowdown since March and the potential impact on the Fed’s tapering timeline, the S&P 500 climbed back near a record by Friday’s close as the 10-year Treasury yield sank to near its lowest level since early March. Futures on the S&P 500 were near unchanged while the 10-year yield had recovered 2.7 bps to 1.58%, leading a global uptick in sovereign rates to start the week. Interest rates have moved sideways in recent weeks and remain rangebound as investors await the next catalyst to shake things up. A deal between G7 finance ministers to support a 15% minimum global tax over the weekend hasn’t elicited much of a reaction. However, the market response to the May CPI report on Thursday is likely to be more eventful.
ICYMI – June 4, 2021 Weekly Market Recap: Before the BLS released its May payroll tally on Friday, the Markit and ISM PMIs both indicated that demand remained strong amid continued economic reopening, exacerbating a supply-side strained by supply chain congestion, materials shortages, and rising prices. The Fed’s Beige Book told a similar story. And while each of those reports also indicated businesses were struggling to find workers, jobless claims fell to new pandemic lows and ADP’s private payroll estimate was much stronger than expected, heightening the anticipation for Friday’s jobs data. The BLS reported the economy recovered 559k jobs in May, less than the 675k expected, with 78% of the increase accounted for by gains in leisure and hospitality (292k) and education (143k). While seasonal adjustments may be skewing the overall picture, the pace of recovery remained slower than expected. Unemployment ticked down from 6.1% to 5.8%, in small part because of a disappointing month for participation. While there were fewer permanently and longer-term unemployed, firm wage gains, elevated hours worked, and the slow pace of hiring supported the possibility that supply issues are limiting the labor market recovery. After a modest initial reaction, the 10-year yield tumbled 7.2 bps Friday to 1.55% as investors reassessed how quickly the economy may actually make the “substantial further progress” necessary for the Fed to taper asset purchases. Click here to view the full recap.
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