September 3, 2021

Weekly Market Commentary August 30th to September 3rd 2021

All eyes were once again on the employment situation this week as the government released its monthly payrolls report for August. The employment situation is especially relevant these days as it is the leading reason the Fed has yet to begin to taper its bond-buying and raise interest rates. The report was a mixed bag with the headline-grabbing non-farm payrolls coming in way under expectations at 235,000 newly created jobs when upwards of 750,000 was expected. Last month’s figure was revised upwards by 110,000 to 1,053,000 so things weren’t all that bad. Also on the positive side was the unemployment rate which fell to 5.2%, and month-over-month average hourly earnings came in at +0.6% when expectations called for +0.3%. Reasons for the mixed employment numbers run from the emergence of the Covid Delta variant causing global manufacturing bottlenecks to seasonal hiring practices. On Thursday, initial jobless claims for the week continued its downward trend and came in at 340,000. Remember, the Fed wants to see the employment situation stabilize before they think about ending accommodative monetary policy.

Elsewhere in the economy this week, Pending Home Sales disappointed, coming in at -1.8% for the month of July when +0.4% was expected. Consumer Confidence as measured by the Conference Board, plunged to a six-month low of 113.8, driven by the continued spread of the Delta variant. And finally, the Institute for Supply Management released its manufacturing and service indices for August. The ISM Manufacturing Index beat expectations of 58.5 by coming in at 59.9 (remember anything above 50 is considered expansion). And on Friday, the ISM Services Index came in at 61.7 which was roughly on target with expectations. Both ISM numbers continue to show strength in the wake of other faltering economic data. Lastly, Factory Orders for July matched expectations, coming in at +0.40%, a sharp decline from June’s +1.50%.

In financial markets, equities finished the week mixed with the S&P 500 (+0.6%) and the NASDAQ (+1.5%) finishing on the positive side, while the Dow Jones Industrials (-0.2%) ended in the red. In fixed income, shorter term interest rates were virtually unchanged for the week as the 2-year US Treasury finished the week at 0.21%; while longer yields such as the 10-year (1.32%) and 30-year (1.95%) were up slightly for the week.

Next week’s economic data releases will be very light. We will see Producer Prices (PPI), Inventories, and Weekly Jobless Claims.