September 7, 2020

Weekly Market Commentary August 31st to September 4th 2020

The Nonfarm Payrolls report was higher than anticipated for August with a 1.37 million annualized pace of new jobs. Unemployment in the U.S. pulled back to 8.4%; while still high on a historical basis, it is a step in the right direction. Weekly Jobless Claims fell back below 1 million to 881k. This is a positive on the surface, but unfortunately all of the weekly decline comes from a seasonal adjustment factor in the data implemented by the Bureau of Labor Statistics. Without the adjustment, the total would have risen marginally. Continuing Claims were somewhat lower at 13.2 million, although a look through the data shows that the level of those receiving pandemic-related assistance increased marginally.

The ISM Manufacturing report was stronger than anticipated for August, moving further into expansion territory at a reading of 56. New Orders accelerated to the fastest level since 2004, although hiring in factories has not kept pace. Factory Orders reported from back in July were stronger as well, up 6.4% and revised higher in June. The ISM Non-Manufacturing (Services) report was higher in the month as well, but at a slower pace of expansion.

U.S. equities maintained their march higher through mid-week until a round of profit taking, primarily in technology stocks, sent stocks lower on Thursday and into the final trading session. The S&P 500 closed the week off by -2.3% to 3,426. The more technology-focused NASDAQ Composite was off by -3,3% to 11,313. The 10-year U.S. Treasury yield traded within a range of 0.62% (with prices rising initially during the risk-off pullback) to 0.74%, before finishing a basis point from where it started at 0.71%.

Key economic releases in the holiday-shortened week next week include the JOLTS Jobs Report, CPI and PPI Inflation, and Weekly Jobless Claims.