Treasury Market Summary » 17:4507/2307/23/21
Treasury Market Summary:…
Treasury Market Summary: it was a profitable session for Wall Street's bulls on Friday, Bonds and stocks were mostly firm on the session, holding small gains into the close. Drivers on the day were the unexpected jump in jobless claims and the ECB's strengthening of its dovish guidance. Treasury yields richened with the longer dated rates falling over 3 bps, taking the 10-year down to 1.265% and the bond to 1.903% after the weaker data. Concurrently, Wall Street gave up some ground on the data. But, the ECB's tweak of its forward guidance, strengthening its dovish bent, helped underpin European bourses and bonds, with spillover to U.S. markets. The NASDAQ finished 0.36% firmer, with the S&P 500 0.2% higher, and the Dow up 0.07%. Other data included another record high level on the June leading index, and a bounce in existing home sales, accompanied by a record high sales price.
FOMC preview: the Fed meeting Tuesday, Wednesday highlights » 15:5507/2307/23/21
FOMC preview: the Fed…
FOMC preview: the Fed meeting Tuesday, Wednesday highlights the upcoming week. However, more likely than not it will be a nonevent, especially as it will not include forecasts. There had been expectations policymakers might suggest they are closer to announcing a timeline for QE, but analysts don't anticipate that. Chair Powell did confirm that the Committee actually started talking about tapering in April, and will likely indicate discussions have continued as the economy has been improving and inflation has been accelerating, analysts expect him to reiterate that the "substantial further progress" criteria has yet to met. Powell did acknowledge last month that inflation has come in stronger than forecast. He also was reticent to characterize inflation as transitory and added that the Fed would be prepared to act if price pressures or longer term inflation expectations were seen to be moving "materially and persistently" above above goal. And while those factors suggested a slight hawkish leaning, the downside risks to the recovery from the spreading Delta variant and the various bottlenecks, will leave risks fairly balance with no hints that a decision on the timing QE is imminent. That would eliminate news coming out of the August Jackson Hole central banker meetings.
Action Economics Survey results » 14:1507/2307/23/21
Action Economics Survey…
Action Economics Survey results: the Olympics have gotten underway with a very quiet, fan-less opening ceremony under the cloud of covid and now the Delta variant. Despite the fears reflected in Monday's equity rout that the virus and some of the other bearish consequences of the pandemic and reopenings (including labor and goods shortages, surging prices) would weigh heavily on growth, investor sentiment has recovered and stabilized. Indeed Wall Street is on course for more record highs. The markets will be put through their paces next week with a number of factors on tap, including the FOMC, data, earnings, and supply. It is still the case that the Fed is a long way from rate hikes, and it is looking more unlikely that Powell and Company will not announce any timeline for QE tapering anytime soon. Data includes housing stats, durable goods, Q2 GDP, ECI, income, consumption, and confidence. The Survey Medians point to a bounce in June new home sales to a 0.800 M clip. Durable goods orders should increase another 2.1% in June. Q2 GDP is expected to print a solid 8.5% rate. Meanwhile, the 0.9% expected increase in Q2 ECI will underscore rising wage and price pressures.
Treasury Action: Treasuries are little changed since the open » 13:5007/2307/23/21
Treasury Action: Treasuries are little changed since the open, while Wall Street is hitting record highs. The front end has taken the leadership position in a steepening trade. Both bonds and stocks generally remain supported by ongoing Fed accommodation, while a lot of bearish factors are being overlooked. The wi 2-year yield is fractionally richer at 0.220%, with the wi 5-year rate also marginally lower at 0.735%. The 10- and 30-year maturities are cheaper with the former rate up 0.8 bps to 1.286%, with the latter 1.6 bps higher at 1.931%. The 2s-10s spread widened to 108.5 bps from 107.6 bps Thursday and is out from 97 bps Monday. The 5s-30s gap has steepened to 121.4 bps versus 119.5 bps yesterday and 111.4 bps Monday. The market has a lot on its plate heading into the last week of July, but so far it's taking everything in stride. Of course the Delta variant is raging, but hospitalizations and deaths are not, limiting the fallout. There has been no response to comments from Treasury Secretary Yellen's warning of default risk if the debt limit is not passed. The bond market is used to the tedious exercise. The FOMC is on tap next week but no change to the currently dovish stance is expected, with no updates on a QE tapering timeline. There are a lot of earnings reports, but solid earnings are anticipated. Also slated are key economic reports, but none will alter the outlook for solid growth currently. Supply is on tap with $183 B in 2-, 5-, and 7-year auctions, but that sector of the curve is currently leading the day's rally.
Oil Action: The weekly Baker Hughes oil rig count » 13:3007/2307/23/21
Oil Action: The weekly…
Oil Action: The weekly Baker Hughes oil rig count revealed a fourth straight week of increases, with seven additional rigs coming online, bringing the total to 387. WTI crude was unmoved by the data, and idles near one-week highs, just under $72.00.
FX Action: USD-JPY » 12:1007/2307/23/21
FX Action: USD-JPY…
FX Action: USD-JPY rallied to eight session highs of 110.59 in N.Y. morning trade, up from early lows of 110.39, and 110.09 lows seen after Thursday's close. The pairing responded to another risk-on session, which has seen both stocks and Treasury yields nudge higher. The pairing is above its 20-day moving average, which sits at 110.41. Direction of the pairing is likely to continue being driven by the risk backdrop going forward.
Treasury Action: yields are dipping » 11:0507/2307/23/21
Treasury Action: yields…
Treasury Action: yields are dipping as the bond market pares earlier weakness, even as Wall Street rallies. The front end of the curve is in the green with the wi 2-year dipping fractionally to 0.220%. The 10-year is little changed at 1.280% as buyers stepped in as the rate cheapened to 1.3115%. Similarly, the 30-year has richened to 1.924%, recovering from the uptick to 1.95%. The dovish tone from the ECB continues to underpin ahead of the FOMC meeting where most now doubt there will be any indication of a timeframe for QE tapering. Indeed, the uncertainties and concerns over the Delta variant, as highlighted by the empty stadium for the Tokyo Olympics opening ceremonies, and Monday's rout in global equities, will keep Powell and Company cautiously on the sidelines.
Wall Street opened higher » 10:1007/2307/23/21
Wall Street opened…
Wall Street opened higher, with gains led by the Dow, which is up nearly 0.4%. The S&P 500 has added 0.4%, while the NASDAQ lags, up 0.3%. Social media stocks Twitter and Snap are higher on better earnings and increased subscribers, which has dragged Facebook and Alphabet stocks higher. Next week is a big one for big tech earnings, with Apple, Microsoft, Alphabet, Facebook, Amazon and Tesla all due to report. Overall, higher earning have offset potential concerns over the fast-spreading delta Covid variant, though while the economic outlook is not as robust as it had been, growth should still be quite robust, especially as few see serious pandemic related lockdowns or restrictions in the cards.
U.S. Markit manufacturing PMI rose another 1 point to 63.1 in the flash July print » 10:0007/2307/23/21
U.S. Markit manufacturing…
U.S. Markit manufacturing PMI rose another 1 point to 63.1 in the flash July print after it rose 1.6 points to an historic high of 62.1 in June. That's better than expected and marks yet another fresh all-time high. It was at 50.9 in July 2020. The input price component also rose to a new peak at 86.4, besting the prior one set in June at 82.8. The employment gauge also increased. Meanwhile, the services index fell -4.7 points to 59.8 for the July preliminary gauge after dropping -5.8 points to 64.6 in June. It was at an all-time high of 70.4 in May, and was at 50.0 last July. This is the lowest since February, but it is still as 12th straight month of expansion. Input prices slid to 72.1 from 74.2, but is a 14th month of expansion. Employment declined. Finally, the July composite index dropped -4 points to 59.7 following the -5 tick decline to 63.7 in June, continuing to slide from the all-time high of 68.7 in May. The July 2020 index was at 50.3. The employment and new orders gauges also fell.
July PMI flash composite index 59.7 09:4907/2307/23/21