THE ISM, ADP EMPLOYMENT SURVEY AND JP MORGAN

Another bulge bracket firm—JP Morgan—is suggesting the 10-year Treasury can trade to  1.90% by year end.  The Bank joined Citibank and Bank of America with a similar forecast.

JP Morgan’s comments were primarily technical in nature stating “any move above 1.40% will create bearish medium-term momentum dynamic in which selling pressure has an increased chance of creating more selling pressure, the inverse of the aggressive rally that caused rates to fall to 1.12% last month.”

As noted many times, almost all trading in the Treasury market is result of technology, trading based upon some algorithm or momentum indicator.

At the time of this writing the 10-year is yielding 1.30%, nominally lower in yield.

Commenting about yesterday’s the data, the statistics continued to suggest massive supply issues.  The ADP Private Sector Employment survey disappointed, the result of a dearth of available workers.

The ISM Manufacturing Index did surprise on the upside but the ISM stated “companies and suppliers continue to struggle at unpresented levels to meet increasing demand that is creating massive supply bottlenecks, labor constraints and other shortfalls leading to record long lead times.”  The ISM index of backlogs rose and matched the second highest reading in data back to 1993.

Tomorrow the BLS Employment Report is released.  The Federal Reserve adamantly believes that once the expiry of enhanced unemployment benefits, workers will return to the workforce thus reducing wage pressures.

An issue at hand 27 states have already ended these enhanced benefits and the statistics are clearly states there is a labor shortage.

The equity markets have been focusing on the shortfalls in the data, shortfalls that on the surface supports ultra-loose monetary conditions, disregarding the reasons for these shortfalls which have completely different connotations.

Commenting on yesterday’s market action, the averages were bifurcated with the NASDAQ posting nominal gains while the S & P 500 was flat.

Last night the foreign markets were up.  London was down 0.06%, Paris up 0.10% and Frankfurt up 0.02%.  China was up 0.84%, Japan up 0.33% and Hang Seng up 0.24%.

The Dow should open flat. The 10-year is up 2/32 to yield 1.30%.

 

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. The information contained herein has been compiled from sources believed to be reliable; however, there is no guarantee of its accuracy or completeness. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. The material provided in Daily Market Commentaries or on this website should be used for informational purposes only and in no way should be relied upon for financial advice. Please be sure to consult your own financial advisor when making decisions regarding your financial management. Members of FINRA and SIPC, Capitol Securities Management is a privately owned full-service retail brokerage and investment advisory firm headquartered in Richmond, Virginia. For nearly 30 years, we have been serving the needs of our investors. Today, more than 200 Capitol Securities Management investment professionals and support staff serve approximately 18,000 customer accounts from Southern Florida to the New England coast.