What Happened Last Week?
Month-End Volatility, but No Bearing on Bigger Picture
It was a deceptively interesting Friday for the bond market with month-end trading creating volatility that seemed relevant at first glance. Those trades easily overshadowed the calmer market movement seen in the morning hours following the PCE data, but that was a very low bar. In the grand scheme of month-end trading days (especially those that fall on the Friday before a 3-day weekend), Friday’s volatility was average. This week holds far more promise to shape the debate over a 25 vs 50bp Fed rate cut and, consequently, the next big move for the bond market.
Source: Matthew Graham, Mortgage News Daily 8/30/2024)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest ability to impact your backend pricing this week are: (1) Jobs, Jobs, Jobs, (2) ISMs and (3) The Talking Fed.
(1) Jobs, Jobs, Jobs: It’s the first week of a new month which means a Big Jobs Friday report from the BLS. But throughout the week will be a ton of job and wage related data points that the bond market will be keenly focused on: Unit Labor Costs, Challenger Job Cuts, ADP Payrolls, Initial Weekly Jobless Claims, Non Farm Payrolls, Unemployment Rate, JOLTS, Average Hourly Earnings.
(2) ISMs: After a round of very weak/contractionary regional manufacturing reports last week, this week’s ISM Manufacturing PMI will get a lot of weight but the ISM Services which accounts for 2/3 of our economic engine will be the center of attention with attention given to Prices Paid and the Employment Index.
(3) The Talking Fed: The Fed’s Beige Book will be issued on Wednesday, which is prepared in advance of the September FOMC meeting. Also, Fed Gov Waller will speak on Friday after the Jobs data. The Bank of Canada is expected to cut rates on Wednesday.
Market Wrap-up
Domestic Flavor
Bob the Builder: July Construction Spending slumped by -0.3% versus estimates of +0.1%.
Rosie the Riveter: After a series of weak regional manufacturing reports, the national August ISM Manufacturing PMI was contractionary at 47.2 (50 is breakeven) and below the consensus estimates of 47.5. The Employment component moved from 43.4 to 46.0. Prices Paid jumped from 52.9 to 54.0 in a sign that inflation is still sticky and even rising.
On Deck for Tomorrow
Weekly Mortgage Applications, Trade Balance, Factory Orders, JOLTS and the Fed’s Beige Book.