A third-tier employment report was the catalyst for a moderate decline in equities and an advance in Treasury prices. The Challenger Jobs Cuts Survey, a survey that typically attracts little attention, indicated that companies slashed the greatest number of jobs for the month of October since 2003. Wednesday, equities rallied on the ADP Private Sector Employment Survey that suggested the opposite.
Because of the government shutdown, the markets are void of many indicators thus the ones that are released may garner outsized attention.
The yield curve steepened considerably yesterday as the odds of a December rate cut increased considerably.
Fed Bank of Cleveland Beth Hammack stated however that inflation is a bigger risk than job weakness. Her Chicago counterpart Austan Goolsbee stated a lack of inflation data during the shutdown makes him uneasy about rate cuts. Another Fed official stated that there is till work to do on inflation while ensuring the labor market is solid.
Wow! Talk about uncertainty and mixed signals.
And then there are the tariffs. Many believe the Supreme Court may strike down the tariffs. Such action might be good for corporate profits but might cause yields to rise as the $200 billion plus in tariffs must be refunded. Moreover, the continuity of these revenues is shattered.
It is highly anticipated that the Administration may take another path, but this path too is fraught with lawsuits and appeals which may further increase the uncertainty.
Many are asking if it is more uncertain today than yesterday or does it only appear to be more uncertain given it is the here and now?
The economy will always face uncertainty but a free market will correct the inefficiencies for a better tomorrow.
What will happen today?
Last night the foreign markets were down. London was down 0.81%, Paris was down 0.55% and Frankfurt down 0.98%. China was down 0.25%, Japan down 1.19% and Hang Seng down 0.92%.
Futures are down about 0.30%. FORX or currency traders are on course for the worst year since 2005, partially blamed on the shutdown and the dearth of data to the uncontrollable fiscal recklessness of Wahington and the Western Democracies. All great fiscal crisis commences in the currency markets given the opaque use of leverage and the gazillion global interlocking relationships between debt and currency values. The 10-year is off 2/32 to yield 4.10%.
