Dow dropped 281, decliners over advancers a hefty 5-1 & NAZ sank 291. The MLP index declined 2+ to 237 & the REIT index was off 3+ to 376 as interest rates rose. Junk bond funds pulled back along with the stock market slide & Treasuries were sold on the Fitch downgrade of US debt (more below). Oil fell 1+ to 80 & gold gave back 7 to 1971.
AMJ (Alerian MLP Index tracking fund)
Private sector companies added far more jobs than expected in Jul, pushed higher by a boom in leisure & hospitality jobs, payroll processing firm ADP reported. Job gains for the month came to 324K, driven by a 201K jump in hotels, restaurants, bars & affiliated businesses. That total was well above the estimate for 175K, though it marked a decrease from the downwardly revised 455K in Jun. The report provides another indication that the US jobs market has retained its strength despite an extended Federal Reserve campaign to slow the economy & bring down inflation. “The economy is doing better than expected and a healthy labor market continues to support household spending,” said Nela Richardson, ADP's chief economist. “We continue to see a slowdown in pay growth without broad-based job loss.” Services-related industries dominated job creation during the month as the economy continues its transition back from being goods-oriented in the early days of the Covid pandemic. The sector was responsible for 303K jobs on the month. Along with the big move in leisure & hospitality, information services added 36K positions; trade, transportation & utilities grew by 30K & the other services category, which encompasses things such as dry cleaning, housekeeping & the like, contributed 24K. Goods producers added just 21K, as natural resources & mining increased by 48K but manufacturing lost 36K. Construction was responsible for the other 9K. ADP also noted that wages increased by 6.2% from a year ago, well above the long-term pace but the lowest growth since Nov 2021.
Private sector added 324,000 jobs in July, well above expectations, ADP says
Fitch
announced it has officially downgraded the US
long-term foreign-currency issuer default rating to "AA+" from "AAA,"
saying the downgrade "reflects the expected fiscal deterioration" &
the nation's heavy debt burden. The ratings agency pointed the
America's "erosion of governance,"
rising deficits, & tightening by the Federal Reserve. It also said
its
expects the US economy to slip into a mild recession in the 4th
qtr. Treasury Secretary Janet Yellen issued a statement
pushing back on Fitch's move, saying the rating agency was using old
data & arguing conditions have improved under the Biden
administration. "I strongly disagree with Fitch Ratings’ decision,"
Yellen's
statement said. "The change by Fitch Ratings announced today is
arbitrary and based on outdated data." "Fitch’s quantitative
ratings model declined markedly between 2018 and 2020 – and yet Fitch is
announcing its change now, despite the progress that we see in many of
the indicators that Fitch relies on for its decision," she continued.
"Many of these measures, including those related to governance, have
shown improvement over the course of this Administration, with the
passage of bipartisan legislation to address the debt limit, invest in
infrastructure, and make other investments in America’s
competitiveness." Investors
use credit ratings to assess the risk profile of companies &
govs when they raise financing in the debt capital markets. Generally,
the lower a borrower's rating, the higher its financing
costs. The agency also said it expects the US federal deficit to grow
from 3.7% of GDP in 2022, to 6.3% of GDP in 2023.
Fitch downgrades US' long-term ratings from 'AAA' to 'AA+'
The 10-year Treasury yield rose as investors considered the outlook for the economy after Fitch Ratings downgraded the US' long-term foreign currency issuer default rating. The yield on the 10-year Treasury added nearly 5 basis points to 4.094% & hit its highest level since Nov. The 2-year Treasury yield was flat at 4.918%. Yields & prices have an inverted relationship & 1 basis point equals 0.01%. Investors assessed the state of the US economy as Fitch Ratings cut the US' long-term foreign currency issuer default rating from AAA to AA+. The agency referenced “fiscal deterioration over the next three years” as well as issues with governance standards & pressures related to growing general debt. Fitch had first placed the US on negative watch during the debt ceiling crisis earlier this year & referred to the tensions. “The repeated debt-limit political standoffs & last-minute resolutions have eroded confidence in fiscal management,” it said. Adding pressure to yields was news that the Treasury Dept will sell $103B of securities next week. The sale will come in the form of 3-year, 10-year & 30-year debt.
10-year yield rises as investors weigh economic outlook
Dow Jones Industrials
No comments:
Post a Comment