The Market Today

Unemployment Insurance Data Positive, Except for PUA Claims in California


by Craig Dismuke, Dudley Carter

TODAY’S CALENDAR

Unemployment Insurance Data Positive, Except for PUA Claims in California: Initial jobless claims for the week ending November 13 inched down from 269k to 268k, a new low for the pandemic.  Thirty five states reported improvement in initial claims.  Continuing claims for the week ending November 6 declined more than expected, down 129k to 2.08mm.  Continuing claims for averaged 1.73mm in the 11 weeks in 2020 before the pandemic hit. On a negative note, the number of persons receiving continuing pandemic assistance jumped 537k for the week ending October 30 and a 568k increase in California.  The increase brought total claims filed for the reference week to their highest level since the expiration of the unemployment assistance programs.

Philly Fed Index Jumps on New Orders; Prices Received Index Highest Since 1974: Like the New York Fed’s index released earlier in the week, the Philadelphia Fed’s November Business Outlook index jumped more than expected, up from 23.8 to 39.0.  While the delivery times index remained high increasing from 32.2 to 35.7, the biggest contribution to the headline strength was a 16.6-point jump in the new orders index.  The prices paid index also jumped 9.7 points to 80.0, its second-highest reading since 1979.  Manufacturing are increasingly passing those higher input costs on to consumers; the prices received index rose 11.8 points to 62.9, its highest level since 1974.

Additional News: Speaking from the Fed today are New York Bank President Williams, Chicago’s Evans, and San Francisco’s Daly.  The Kansas City Fed will also release their November report on regional manufacturing activity.


OTHER ECONOMIC NEWS

Fed News: Chicago Fed President Evans, a dove and current-year voter, said supply bottlenecks and stronger inflation have lasted longer than he anticipated but should recede. “We’re still going to be monitoring, watching this well into the middle of next year,” he added. Evans said an unemployment rate of 4.5% at year-end, below the Fed’s 4.8% year-end projection from September, wouldn’t surprise him and he’s “optimistic that we’ll be looking at a vibrant labor market in 2022.” Separately, the White House said President Biden would likely make his highly anticipated pick for Fed Chair by Thanksgiving.


TRADING ACTVITY

Treasury Yields Pulled Back Wednesday from Recent Highs as Equities Dipped: Markets were on the move Wednesday as investors split their attention between additional reports of high inflation, strong signals about the U.S. consumer, and a decline in oil prices. Prior to U.S. trading, Canada reported inflation of 4.7% in October, an 18-year high, while the U.K. said prices rose 4.2% from a year ago, more than expected and the quickest in ten years. Central banks in both countries have signaled in recent weeks that rate hikes are likely to occur soon. Despite raising its forecast for sales over the holiday quarter, Target saw its shares fall sharply on signs the inflationary pressures were and would continue to impact margins. The losses kept a lid on retail shares and contributed to the S&P 500’s 0.3% decline. Energy companies were the biggest drag on the index as oil prices fell more than 3% on prospects for increased supply. U.S. WTI closed below $80 per barrel for the first time since November 4. Treasury yields had been steady overnight but began a dayslong slide early in U.S. trading that persisted through a tailing 20-year auction and left the curve flatter by the close. The 2-year yield slipped 2.0 bps to 0.498%, the 5-year yield fell 3.4 bps to 1.231%, and the 10-year yield dropped 4.5 bps to 1.589%.

Although U.S. equity index futures recovered overnight and Treasury yields stabilized, many of the themes from yesterday’s U.S. session carried over into foreign markets on Thursday. Most global equity indices and sovereign yield curves were lower amid a subdued news flow and oil prices added to Wednesday’s declines. S&P 500 futures were up 0.3% at 7 a.m. after Macy’s and Kohl’s joined the list of U.S. retailers that have posted better-than-expected earnings this week and boosted forward guidance. Just before the jobless claims data and Philadelphia Fed Business Outlook Index were released, the 2-year yield was down 0.6 bps to 0.49% while the 10-year yield had inched up 0.3 bps to 1.59%. Following the morning reports, at 7:35 a.m. CT, yields were at new session highs. The 2-year yield was 0.8 bps higher at 0.51%, the 5-year yield was up 1.5 bps to 1.25%, and the 10-year yield was up 1.0 bp to 1.60%.


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