November 5, 2021

Weekly Market Commentary November 1st to November 5th 2021

US Manufacturing (ISM) beat expectations for the month of October with a reading of 60.8. While this is slightly less than September’s reading of 61.1, it marks the reading’s 17th consecutive month of expansion. ISM Services also posted its 17th month of gains recording a new high of 66.7. Both reports noted that demand remains strong, but supply chain constraints continue to limit growth.

The second half of the week came with a lot of employment data. Wednesday’s ADP Employment Report came in near the top of the consensus range at 571k. Initial Jobless Claims further declined to 269k, well below consensus and the prior week’s number. Non-Farm Payrolls rose by 513k, with the prior two months being revised upwards by a total of 235k. The Unemployment Rate fell from 4.8% to 4.6%, while the Labor Force Participation remained stubbornly at 61.6%. Digging a little deeper, the participation rate for those 55 and older dropped from 38.6 to 38.4, giving some credence to the idea many are retiring early. Additionally, daycare jobs rose by less than a thousand; the industry is still over a hundred thousand workers short of pre-pandemic levels. Lack of childcare has kept many parents – specifically women – from re-entering the workforce.

The FOMC policy meeting came and went with no big surprises. As expected, the Fed will begin tapering their assets purchases; $10bn fewer Treasuries and $5bn fewer mortgage-backed securities, during the month of November and likely into the middle of next year. The Fed did offer some detail in what they believe are transitory factors contributing to inflation by stating, “Supply and demand imbalances related to the pandemic and the reopening of the economy have contributed to sizable price increases in some sectors.”

Markets reacted positively to the jobs data; the Nasdaq lead the way finishing the week up 3.1%, while the DJIA and S&P 500 increased 1.4% and 2.0%, respectively. The yield on the 10-Year U.S. Treasury decreased by 11 basis points to 1.45%.

Next week is light on economic data but we will get Producer and Consumer Prices, both of which are sure to capture investors’ attention.

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