WAS YESTERDAY A HARBINGER OF THINGS TO COME?

At one time yesterday the rout yesterday in the two year Treasury—or the instrument most sensitive to monetary policy—was the biggest in ten years according to Bloomberg.  The 10-year saw the biggest increase since November 2016.  The catalyst for the selloff was three fold…trade, the ADP Private Sector Employment Survey and third the ISM non-manufacturing index.  I have little comment about trade.

Regarding the ISM non-manufacturing index, August saw the sharpest monthly rebound in business activity since early 2008 rising to a three month high.  The prices paid index also rose by an amount greater than expected, significantly exceeding July’s level.

Regarding the ADP Employment Index, private companies added the most jobs in four months.  Analysts had expected a 148,000 increase versus the 195,000 reported increase.  Weekly jobless claims were little changed, near the lowest level since 1969.

Today the BLS Employment report is released.  Analysts are expecting a 160k and 150k increase in non-farm and private sector payrolls, respectively, a 3.7% unemployment rate, a 0.3% increase in average hourly earnings, a 34.4 hour work week and a 63.0% labor participation rate.

The data could reinforce the emerging narrative that the economy is indeed stronger than suggested.  The data is released at 8:30.

Last night the foreign markets were mixed.  London was down 0.10%, Paris down 0.03% and Frankfurt up 0.39%.  China was up 0.46%, Japan up 0.54% and Hang Sang up 0.66%.

The Dow should open nominally higher ahead of the jobs but this could radically change. Moreover FRB Chair Powell is speaking today. While he is expected to say little about monetary policy and comments from a FRB official could move markets. The 10-year is off 13/32 to yield 1.61%.

kent
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.