02 Sep 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%.