This past Friday, Nonfarm Payrolls increased by 1371k, in line with expectations. The unemployment rate was 1.4% lower than expectations at 8.4%. These employment numbers continue to reflect growth from the peak of joblessness in April, which was nearly 15%.
Today, Senate Majority Leader said that he will be preparing a vote on the Congress floor for a newer, smaller version of a virus stimulus bill that targets some of the most urgent issues regarding healthcare, education, and the economy. Senate Democrats are expected to block the bill.
The first day after the Labor day weekend often marks the return to school for many students, but methods of return to school during a pandemic period greatly vary between states and districts. In NYC, only staff returned to building today, while limited in-person instruction will be available for students beginning September 21st.
Fixed Income Market:
As expected, the week leading up to Labor Day was a quiet one in the fixed income markets. Despite the heavy sell off in equities, fixed income spreads remained mostly unchanged and at the tightest we’ve seen since February pre-COVID levels. The new issue market also took a breather with very light volumes and no notable deals. The markets are tightly focused on both the November elections (now 56 days away), and the first Presidential debate which is just 3 weeks from today. We expect to see a widening in credit spreads if the selloff in equities continues.
Lipper Fund flow data for the week showed:
Domestic Equity Funds down $8.9 BLN
IG Bond Funds up $10.7 BLN
HY Bond Funds up $319 MLN
Municipal Bond Funds up $600 MLN
MMKT Funds down $4.1 BLN
Domestic Equity Funds down $6.0 BLN
IG Bond Funds up $6.0 BLN
HY Bond Funds up $1.4 BLN
Municipal Bond Funds up $1.0 BLN
MMKT Funds down $4.6 BLN
The string of weekly gains was ended last week as all three major indices suffered pull-backs. Tech led the way lower with NASDAQ off 3.25%. S&P 500 and DJI followed being lower by 2.27% and 1.73% respectively. The move was broad based with 9 out of 11 sectors finishing the week negative. Utilities and Materials were modestly higher and Communication Services and Energy were the big losers. Rush to value stocks was a theme as well with Russell 1000 Value Index down .3% vs Russell 1000 Growth Index off by 3.4%. The CBOE Volatility Index, considered by many as a fear gauge in the market, spiked to 30.7, the highest level since early July.
The currency markets are returning to a shortened week after the Labor Day holiday.
The dollar is stronger to begin the week as it has rebounded from the lows traded last week due to month-end rebalancing. Positive employment data out of the U.S. has been the catalyst for the recent move higher in the dollar. U.S. interest rates remaining at or below current levels and continued delays to the fiscal stimulus could weigh on the U.S dollar in the coming weeks.
Last Week's Economic Data September 8th
|Last Week's Economic Data||Actual||Survey|
|New Home Sales||790k||901k|
|Durable Goods Orders||11.2%||4.8%|
|GDP Annualized QoQ||-31.7%||-32.5%|
|Initial Jobless Claims||1006k||1000k|
|Wholesale Inventories MoM||-0.1%||-0.9%|
|This Week's Economic Data||Release Date||Survey|
|Durable Goods Orders||9/02/20||11.2%|
|Initial Jobless Claims||9/03/20||950k|
|Change in Nonfarm Payrolls||9/04/20||1390k|
This Week's Economic Data September 8th
|Interest Rates||Current||WoW||MoM||YoY||US Swap Spreads||Current||WoW||MoM||YoY|
|1 Month Libor||0.16%||(1.8 bp)||(1.0 bp)||(195.5 bp)||12-Month||+12 bp||+1.0 bp||+1.1 bp||+8.6 bp|
|3 Month Libor||0.24%||(0.9 bp)||(2.7 bp)||(188.3 bp)||2-Year||+9 bp||+2.1 bp||+1.7 bp||+8.6 bp|
|6 Month Libor||0.31%||(0.5 bp)||(0.8 bp)||(172.5 bp)||3-Year||+9 bp||+2.8 bp||+2.3 bp||+11.8 bp|
|12 Month Libor||0.45%||+0.4 bp||(1.5 bp)||(150.4 bp)||5-Year||+7 bp||+2.4 bp||+2.0 bp||+13.6 bp|
|Fed Funds Effective||0.09%||(1.0 bp)||(203.0 bp)||7-Year||+0 bp||+0.7 bp||+1.7 bp||+12.7 bp|
|SOFR||0.07%||(3.0 bp)||(205.0 bp)||10-Year||+1 bp||+8.4 bp||+16.2 bp||+70.0 bp|
|US Treasury Yields||Current||WoW||MoM||YoY||30-Year||(38 bp)||+13.0 bp||+29.4 bp||+91.7 bp|
|12-Month||0.12%||(0.5 bp)||+1.0 bp||(164.6 bp)||Equity Markets||Current||WoW||MoM||YoY|
|2-Year||0.13%||(2.0 bp)||+2.6 bp||(137.3 bp)||Dow Jones||28,430||(0.8 %)||+7.6%||+7.7%|
|3-Year||0.15%||(2.9 bp)||+3.2 bp||(128.0 bp)||S&P 500||3,500||(0.2 %)||+7.0%||+19.6%|
|5-Year||0.27%||(1.5 bp)||+6.3 bp||(111.9 bp)||NASDAQ||11,775||+0.7%||+9.6%||+47.9%|
|7-Year||0.49%||+2.7 bp||+10.7 bp||(96.2 bp)||Currencies||Current||WoW||MoM||YoY|
|10-Year||0.70%||(2.0 bp)||+2.6 bp||(137.3 bp)||Euro||1.1932||+1.2%||+1.3%||+8.8%|
|30-Year||1.47%||(2.0 bp)||+2.6 bp||(137.3 bp)||Japanese Yen||105.8900||+0.1%||(0.1 %)||+0.3%|
|US Swap Rates vs 3ML||Current||WoW||MoM||YoY||British Pound||1.3365||+2.3%||+2.1%||+10.8%|
|12-Month||0.23%||+0.5 bp||+2.1 bp||(156.0 bp)||Canadian Dollar||1.3046||+1.3%||+2.8%||+2.1%|
|2-Year||0.22%||+0.1 bp||+4.2 bp||(128.7 bp)||Australian Dollar||0.7373||+2.9%||+3.2%||+9.8%|
|3-Year||0.23%||(0.1 bp)||+5.5 bp||(116.2 bp)||Swiss Franc||0.9041||+0.9%||+1.0%||+9.6%|
|5-Year||0.33%||+0.9 bp||+8.3 bp||(98.4 bp)||Israeli Shekel||3.3544||+1.5%||+1.5%||+5.5%|
|7-Year||0.49%||+3.4 bp||+12.3 bp||(83.5 bp)||Bitcoin||11,708||(0.2 %)||+3.2%||+12.5%|
|10-Year||0.71%||+6.4 bp||+18.8 bp||(67.3 bp)||Commodities||Current||WoW||MoM||YoY|
|30-Year||1.09%||+11.0 bp||+32.0 bp||(45.6 bp)||Gold||1,969||+2.1%||(0.3 %)||+29.5%|
|Crude Oil||43||+0.4%||+6.3%||(22.3 %)|