October 8, 2021

Weekly Market Commentary October 4th to October 8th 2021

U.S. manufacturing data kicked off the week and surprised to the upside, with Factory Orders increasing 1.2%, above the estimate of 1.0%. Additionally, the prior month’s reading was upwardly revised to 0.7% from 0.4%. Overall, U.S. manufacturing orders continue to increase as businesses are rebuilding inventories, while hurdles including labor, raw materials, and supply chain bottlenecks remain.

Tuesday offered economic data regarding the U.S. services industry, with the IHS Markit releasing September’s service PMI that registered a 54.9, above the estimate of 54.4. Despite another month of strong expansion, signs of slowing are present with new orders increasing at the slowest pace in 13 months. The IHS Markit Composite Index, which is a weighted average of the Markit Manufacturing Output Index and the Services Business Activity Index, increased to 55.0, down from 55.4 in the month prior and the slowest rate of growth in 12 months as labor shortages continue to hamper output. Lastly, the Institute for Supply Management released their September services index that increased to 61.9, up slightly and more proof of the continued strength in services activity.

Wednesday was a rather light day but offered a glimpse into September’s employment picture with ADP reporting an increase of 568k, well-above the estimate of 430k. Large businesses reported most of the hiring, while the leisure/hospitality sector registered the biggest gain at 226k.
Initial Jobless Claims rose by 326k, below the estimate of 348k, ending a three-week streak of increases. Despite the decline the 4-week moving average increased slightly to 344k. Continuing Claims declined by 97k, to 2.71 million and better than forecast.

Friday brought the week’s most highly anticipated economic data with the Bureau of Economic Affairs employment report. Nonfarm Payrolls missed expectations by a wide margin with employers adding 194k jobs in September, well below the forecast of 500k. The unemployment rate declined to 4.8%, down from 5.2% in the month prior. The Labor Force Participation Rate continues to disappoint, declining slightly to 61.6%. The decline is likely the result of people dropping out of the workforce. Average Hourly Earnings increased by 0.6% in September, higher than the 0.4% estimate, a 4.6% increase from this time last year and indicative of employers having to increase pay to attract workers. Overall, it was a disappointing report and markets will look toward October to see if the rate of new job growth improves.

The S&P 500 declined to start the week as concerns over a debt ceiling limit agreement weighed on financial markets. However, once a deal was reached market volatility declined and the index rebounded to end the week up 0.7% to 4,391. The yield on the 10-year U.S. Treasury opened the week at 1.48% and steadily increased throughout the week, closing at 1.61% and the highest level since June 3rd.

Key economic releases next week include Consumer Price Inflation, Producer Price Inflation, and Retail Sales data.