Thursday – September 5, 2024
UMBS opened Flat. Stock futures down 3.75 points
ADP employment is an on-again/off-again market mover, but it is having an impact today considering the market’s sensitivity to labor market data. Bonds had been unchanged to slightly weaker before the release and moved into positive territory afterward.
ADP Employment = 99k vs 145k f’cast, [111k prev]
Pay increased 4.8% YOY for job stayers and 7.3% YOY for job changers.
Challenger Layoffs = 75k vs 26k prev
Jobless Claims = 227k vs 230k f’cast [232k prev]
Continued Claims = 1838k vs 1870k f’cast, [1860k prev]
The initial reaction to jobless claims data was mildly negative, but not enough to undo the ADP-driven gains. Bringing us back to a net Flat landing.
ISM Services PMI = 51.5 vs 51.1 f’cast, [51.4 prev]
ISM Prices = 57.3 vs 56.0 f’cast, [57.0 prev]
Citigroup examined the ratio of job openings to unemployed people and found that the ratio is back below pre-pandemic levels. The labor market is looser than it was pre-pandemic and continues to loosen further, according to the July JOLTS report. Job openings fell from 8184k in June (now revised down) to a below-consensus 7673k in July. The ratio of openings to unemployed individuals is down to 1.1-to-1, below the 1.2-to-1 ratio that prevailed just prior to the pandemic.
Thursday ended up being fairly uneventful for bonds, with the balance of data leaving us slightly better off. ADP employment had the biggest positive impact and the selling pressure created by ISM Services was ultimately unable to argue a better case. Friday’s jobs report will offer a final ruling of sorts. It will decide whether the early September rate rally will continue and it will also inform the odds of a 25bp vs 50bp rate cut from the Fed in 2 weeks. The range of potential bond market reactions are only limited by the data’s ability to exceed or fall short of forecasts. Potential volatility is as high as it’s been since the beginning of August.
UMBS closed the day up 4 bps at 101.14
