The Market Today
More Mask and Vaccine Mandates; Nothing Yet to Imperil Economic Activity
by Craig Dismuke, Dudley Carter
Delta Drives Mandates for Vaccines and Masks, Boosters for Immunocompromised, and Delays Return to Offices: AT&T said Thursday it would require all employees to wear face coverings and personnel in management to be vaccinated. HHS said it would require its workers to be vaccinated. Facebook delayed its return-to-office date for U.S. employees from October until 2022 and said it was considering pushing back return dates for employees in its foreign offices. San Francisco said it will require proof of full vaccination for anyone that wants to enter a restaurant, bar, gym, or large entertainment venue. The FDA authorized booster shots for certain immunocompromised individuals.
Import Price Gains Slow: Import prices rose just 0.3% MoM in July, lower than the expected gain. This brought the year-over-year rate down from 11.3% to 10.2%. Despite the significant jump in the price of imports over the past year, U.S. goods inflation has seen an inordinately large gain relative to the historical correlation with import prices. Based on import prices, goods CPI would historically be nearer to +2.0% YoY. Instead, goods CPI is currently up 8.5% YoY, illustrating the domestic nature of the forces driving up consumer prices. Also highlighting this issue, export prices rose 1.3% MoM bringing their year-over-year rate up from 16.9% to 17.2%.
Economic Outlook, Consumer Confidence: The August Bloomberg Survey of Economists is scheduled for 8:00 a.m. CT. The University of Michigan’s first look at August consumer confidence is expected to show a slight dip in the outlook (9:00 a.m.).
Equities Rise on Sector Shift as Treasury Yields Inched Back Higher Following Declines on CPI Relief: The tone underlying trading in U.S. equities remained firm on Thursday, although sector leadership shifted in favor of health care and technology shares while cyclical industries drifted lower following a couple of days of solid gains. The S&P 500 rose 0.3% yesterday to notch its third consecutive record close. Health care companies led the way higher as vaccine makers bounced after being beat up over the last couple of sessions. Technology names also found support, helping to lift the Nasdaq to its first positive finish in three days. The tech-heavy Nasdaq had leaked lower since Monday despite the S&P 500 and Dow setting consecutive record highs. Energy, industrials, and materials logged the worst daily performances. The Dow ended Thursday at a new record on an imperceptible gain. Treasury yields, which had taken a breather Wednesday following more moderate consumer price increases and a strong auction of 10-year notes, inched back up after data showed continued declines in jobless claims and a sharper-than-expected increase in producer price inflation. For the day, the 2-year yield added 0.4 bps to 0.22% while the 10-year yield rose 0.8 bps to 1.36%, its highest level since mid-July.
Global Markets Mixed Overnight As Treasury Yields Lag a Rise Across Europe: This week’s up-and-down global trading continued overnight Friday and Treasury yields had veered from the upward path taken by European yields. Stocks mostly fell across Asia under the weight of declines in tech shares and other sectors as well as additional concerns about regulatory scrutiny in China. However, Europe’s Stoxx 600 was 0.2% higher at 7 a.m. CT and on track to notch its longest string of daily gains since 1999. While the cumulative gain of 3.0% isn’t overly impressive, a positive close Friday would represent the index’s tenth consecutive daily rise. Germany’s 10-year yield was 1.6 bps higher, placing it near the middle of the pack of daily increases around the continent. U.S. equity futures were mixed and little changed amid the developments and Treasury yields had inched lower despite the moves higher for borrowing costs for most other global sovereigns. The 2-year yield was flat at 7:20 a.m. CT while the 10-year yield had dipped 0.8 bps to 1.35%.