Slow Walk

Slow walk.  Stocks floated up yesterday in a low volume session on more positive news about US - Chinese trade talks.  A Trump meeting with the Chinese Vice Premier put stock traders in a mostly happy mood resulting in a mixed close for the indexes.

WHAT YOU NEED TO KNOW:

1)  A trade deal between the US and China might happen… soon.  We have heard that before but this time it looks like the bosses, Trump and Xi, are planning a meeting in the coming weeks, a move that would only come as a result of an agreement.  WHILE YOU SLEPT a Chinese news outlet quoted Vice Chairman Liu He as saying that the text of the deal has been agreed upon.  Equity futures responded positively to the news and treasury yields rose slightly.

2)  Brexit…….nah.  Lots of political operating is happening at Westminster with new and forbidden alliances forming all in an attempt to reach some sort of accord.  While no clear path is emerging yet, the latest news includes the potential to put any agreed upon Brexit deal out for a public referendum vote.  That means if the House can agree on a deal, the public would then vote on whether or not to pass it.  Meanwhile Theresa May is preparing to ask the EU for some more time to work things out.

3)  The Fed is in a happy place.  Yesterday’s Fed speakers included Patrick Harker of Philadelphia and Cleveland’s Loretta Mester and they both confirmed that they were comfortable with the Fed’s current stance.  They both made it quite clear that they were not expecting any rate cuts.  In fact, Harker said that he saw no need for rate cuts this year or next.  The market seems content with the Fed’s policy which continues to provide wind under the wings of traders.

4)  Jobs aplenty.  Yesterday’s weekly jobless claims, which is the number of people who filed for unemployment the first time, was the lowest weekly read since 1969.  I have attached a PDF chart of the weekly claims to illustrate the magnitude of the number.  The low number is a result of the labor market tightening.  A tight labor market means that companies will have to compete more aggressively for workers driving wages up.  Rising wages are good for workers but ultimately fuel inflation.

THE MARKETS

Yesterday’s low volume trading session was another marked by investor’s searching for some news to hang onto and the only thing they could dig up was progress on trade talks.  Positive progress on trade talks helped the markets continue their slow march upward with the S&P500 climbing by +0.21%, the Dow Jones Industrial Average rising by +0.64%, the Russell 2000 trading up by +0.42%, and the NASDAQ 100 retreating by -0.06%.  The S&P saw its lowest daily volume of the year ahead of today’s economic releases.  Bonds traded up slightly in yesterday’s session pushing 10 year yields down by 1 basis point to 2.51% and the 3 month / 10 year yield curve closed at around +8 basis points.

WHAT TO LOOK FOR TODAY:

This morning we will get the Department of Labor’s monthly employment situation release, which comes with several important measures.  The top line Change in Non-farm Payrolls is expected to show that +177k new jobs were added in March compared to last months add of just +20k. Economists are looking for a comeback after last month’s sharp and unexpectedly low number.  The unemployment rate is expected to be 3.8%, same as last month’s reading.  Finally, the Average Hourly Earnings are expected to show a year over year growth of +3.4%, flat from last month.  There are many factors that can push today’s numbers in either direction and any significant deviations will certainly add some volatility to the recently quiet markets.  Next week will feature CPI, PPI, Durable Goods Orders, and Factory Orders. The big release next week will be the FOMC minutes from their last meeting.  Have a great weekend.

daily chartbook 2019-04-05

weekly claims history