The opinions expressed below are my own and do not necessarily represent those of Visdom Investment Group, LLC.
Sleepy selling
Like yesterday, today was quiet, even boring. Unlike yesterday, today had a bearish flavor to it from the late morning on. Also unlike yesterday, yields fell across the curve. Lower yields did not seem to assist the equity longs today either. News today was unremarkable and capital flow was light, even by late summer standards. Today’s flow was 72%.
News today isn’t worth discussing. The price action doesn’t give us much to chew on either. The theory that we are simply waiting for the inflation data tomorrow seems a good one. Let’s just assume that investors didn’t want to act much today and the headlines didn’t compel them to either.
There was a macro data release today that’s worth mentioning even though it didn’t move stocks (it did move bonds). The ADP weekly employment change (8.25k vs 11k prior & 3 wks prior revised to 14.5k from 15k) showed labor market weakness. This labor data only began getting published last year, in response to the government shutdown and the lack of stats from the Department of Labor.
Anywho, this ADP labor data shows us a 3-week trend of weakening. This data confirms the labor market weakening trend we’ve seen in the last few nonfarm payrolls numbers. Recession concerns are not merited yet but this but certainly this supports the case for the Fed *not* to hike rates.
To be clear, raging hot inflation will force the Fed’s hand. Softening labor market data won’t hold the tide back on that front, but if the inflation data comes in flat or just a touch hot, the soft labor market will likely help keep the Fed in watch-and-wait mode.
Maybe today’s labor data was worth an extra tenth of a percent of tolerance for tomorrow? Tomorrow’s CPI (3.4% est vs 3.5% prior) could probably print 3.5% now, without triggering outcomes in the rates market that really favor a hike. That’s my guess. Currently, the Fed Funds futures market has a September hike priced at 51%.
See you tomorrow.
-Mike
Visdom Market Commentary
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