The Market Today
Short Trading Week Packed with Potent Economic Data
by Craig Dismuke, Dudley Carter
This Week’s Calendar – Short Week Packed with Potent Economic Data: This morning’s calendar will offer the latest look at the U.S. Manufacturing ISM Index (June), activity and spending in the construction sector (May), and the sales pace of autos in the U.S. (June). The ISM manufacturing index and construction spending are expected to rebound while auto sales are expected to have weakened for a second consecutive month. Markets will only be opened for a half day of trading today and remain closed tomorrow in observance of the Independence Day holiday. On Wednesday, May’s Factory Orders Report will be released early and will include revisions to initial estimates for spending on durable and capital goods. The Minutes from the Fed’s June meeting (included a rate hike, sanguine economic outlook, and a detailed description of the balance sheet normalization plan) will be released later that afternoon. There are a handful of reports scheduled for Thursday morning, but the most important data will be the June ISM Non-manufacturing report and ADP’s prediction for private payroll growth. The apex of the economic data will fall on Friday in the form of June’s official nonfarm payroll data. After an unquestionable disappointment in the May report, economists are looking for total payroll gains of 177k, a stable unemployment rate of 4.3% and participation rate of 62.7%, and a pickup in the pace of earnings growth (+0.3% MoM, 2.6% YoY).
Overnight Activity – Equities Rebound and Yields Fall in Minor Reversal of Last Week’s Melee: Global equities are mostly higher Monday and sovereign yields pulled back in a moderation of last week’s big moves heading into a short trading session for both U.S. stock and bond markets. U.S. markets will close early today but equity futures are signaling the major exchanges could make the most of what time they have. Dow futures are up 0.32% with contracts on the S&P 0.36% higher and the tech-centric Nasdaq out in front with a gain of 0.48%. Those gains come after global trends strengthened in the European session where the Stoxx Europe 600 is up 0.7%. The materials, financials, and energy sectors are all up more than 1% and leading the gains in Europe. European sovereign yields moved lower after last week’s steep rise but the Treasury curve is essentially unchanged. After hitting a nine-month low last Friday, the Dollar has also recovered with gains against all major currencies. Global manufacturing data was in focus overnight: another Chinese manufacturing PMI topped estimates; a quarterly conditions survey of Japanese manufacturers matched a more than nine-year high; and the 74-month high in the Eurozone manufacturing PMI flash estimate was revised 0.1 better in the final release.
ICYMI – June 30 Weekly Recap: There were multiple storylines that developed last week but it was comments from multiple major global central bankers that had the biggest market impact. The 30-year U.S. bond hit a year-to-date low and core PCE inflation fell to a 17-month low of 1.39%. U.S. growth was revised higher thanks to stronger-than-estimated personal consumption and weaker-than-estimated inflationary pressures in the first quarter. The U.S. Senate delayed a vote on its health care bill until after the Fourth of July. But it was comments from the heads of the European Central Bank, the Bank of England, and the Bank of Canada the resonated the most; signaling a potential shift away from persistent easy money policy and sending yield curves higher and steeper. Click here for the full recap.