CONTADICTORY DATA, VACCINE AND STIMULUS

Yesterday’s data was contradictory.

The Private Sector ADP Employment Survey greatly surprised on the downside.  Analysts had expected private sector jobs to increase by 1.2 million but instead only 167,000 jobs were created.

The data clearly indicates the impact of renewed shutdowns, shutdowns that is greatly affecting the leisure sector of the economy.

While the correlation between the ADP Survey and the BLS report has waned considerably over the past several years, the odds have greatly increased that Friday’s BLS report may also be a disappointment.

Perhaps the only silver lining in the ADP data was the sharp revision of the prior month’s data showing a revised increase of jobs to 4,314,000 from the previously reported 2,369,000 million.

At this juncture, Bloomberg is suggesting an increase of 1.5 million private sector and non-farm payrolls for Friday’s BLS report.  June the economy created about 4.8 million private sector and non-farm payroll jobs.  I am relatively certain estimates will be revised lower for Friday’s data.

On the other hand, the US Service Industries expanded in July be the fastest pace since February 2019.  Moreover, an index of new orders jumped by 6.1 points, the highest reading in records dating back to 1997.

I must write this is off of pandemic lows but the strength of the rebound can not be denied. This data parallels the ISM Manufacturing Index which rose in July to the highest level since 2004 according to Bloomberg.

Last week’s GDP data indicated that inventories subtracted about 4% from GDP.  I rhetorically ask is inventory restocking a major reason why the ISM Manufacturing Index rose by the amount that it did?  Just as an aside, the decline in medical expenditures subtracted another 9% from GDP.  Wow!  What will be the impact of all these lost medical screenings?

Commenting on yesterday’s market activity, equities advanced on stimulus and vaccine news.  Gold made an all time high, perhaps the result of the stimulus where the argument is not whether one will occur but rather how much.  Wow!  What will be the unintended consequences of surging national debt?

Regarding a vaccine, similar to a stimulus, it is not if but rather as to when.  Reputable sources suggest anywhere in the next 60 to 120 days.

I am certain the emotionalism around the virus will rise to epic proportions because yes Virginia it is a massive political issue.

What will happen today?

Last night the foreign markets were down.  London was down 1.98%,  Paris down 1.19%  and Frankfurt down 0.84%.  China was Japan down 0.43% and Hang Sang down 0.69%. up 0.26%,

The Dow should open flat ahead of tomorrow’s jobs data.  As expected estimates of job creation are being reduced.  Gold is again rallying on the odds of another trillion-dollar aid package.  The dollar is lower.  The 10-year is up 9/32 to yield 0.52%.

 

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