Dow went up 89, advancers over decliners 5-2 & NAZ gave back 22. The MLP index rose 2+ to the 241s & the REIT index crawled up 1 to 368. Junk bond funds traded higher & Treasuries were heavily sold, raising yields. Oil added another 1+ to 85 & gold was flattish at 1966.
AMJ (Alerian MLP Index tracking fund)
US job growth continued at a moderate pace in Aug while the
unemployment rate unexpectedly jumped, a sign the labor market is
finally cooling in the face of rising interest rates & chronic
inflation. Employers added 187K jobs
in Aug, the Labor Dept said in its monthly payroll
report, topping the 170K jobs forecast. At the same time, a separate report based on a survey
of households offered a slightly different picture of the labor market.
The report indicated the unemployment rate climbed to 3.8% from 3.5% as
the labor force participation rate rose to a nearly 3-year high. It
marked the highest jobless rate since Feb 2022, the biggest
increase since the early days of the COVID-19 pandemic. The
report also contained sharp downward revisions to job growth earlier
this summer. Gains for Jun & Jul were revised down by a total of
110K jobs to a respective 105K & 157K, the gov said,
suggesting the labor market is weaker than it previously appeared. Average hourly earnings, a key measure of inflation, increased 0.2%
for the month & remain up 4.3% from the same time one year ago. Both
figures came in under estimates, a welcome sign for the Federal Reserve. The odds of a Sep rate hike tumbled to just 7% today after the
latest jobs data, according to the CME Group's FedWatch, which tracks
trading. Investors also lowered their expectations of a Nov rate
increase, with just 36.5% of traders predicting another hike.
Unemployment rate takes wild turn as inflation's grip tightens
Short-term Treasury yields traded lower as a key jobs report showed an unexpected increase in unemployment rate in Aug. The 2-year Treasury yield was last trading 1 basis point lower at 4.85% & the yield on the 10-year Treasury rose 7 basis points to 4.15%. Yields & prices have an inverted relationship. One basis point equals 0.01%. The unemployment rate came in at 3.8% for Aug, up significantly from 3.5% in Jul & reaching the highest since Feb 2022, the Bureau of Labor Statistics reported. Meanwhile, average hourly earnings increased 0.2% for the month & 4.3% from a year ago. Both were below respective forecasts of 0.3% & 4.4%. The good news from the report was that the US added more jobs than expected. Nonfarm payrolls grew by a seasonally adjusted 187K for the month, above the estimate for 170K. However, job numbers first reported for Jun & Jul were revised down by a combined 110K. Uncertainty about the Federal Reserve’s policy path lingers after Chair Jerome Powell suggested last week that further rate hikes may be needed to curb inflation, which he suggested remains too high. Some believe that a weaker labor market would prevent the Fed from hiking rates further this year. Markets are pricing in an 93% chance that the Fed will keep rates unchanged at its Sep meeting according to CME's FedWatch tool, but opinions appear divided on what could happen next.
Short-term Treasury yields climbs after unemployment rate ticks higher
The number of homes for sale on the market fell for the 4th straight month in Aug amid the already severe housing shortage. A new report from Realtor.com shows that the total number of homes for sale, including homes that were under contract but not yet sold, tumbled by 9.2% in Aug compared with the same time a year ago. On top of that, available home supply remains down a stunning 45% from the typical amount before the COVID-19 pandemic began in early 2020. "Inventory remains persistently low, even with record-high mortgage rates putting a damper on demand," said Danielle Hale, chief economist at Realtor.com. "The inventory crunch continues to put upward pressure on home prices, amplifying affordability concerns and shutting some potential buyers out of the market." Still, there are some signs of improvement on the inventory front. The report indicated that total inventory has been rising on a monthly basis & is up 19% since Jan. "While inventory continues to be in short supply, August witnessed an unusual uptick in newly listed homes compared to July, hopefully signaling a return in seller activity heading toward autumn, which typically is the best time to buy a home," Hale added. Even though mortgage rates are nearly double what they were 3 years ago, home prices have hardly budged. That is largely due to a lack of available homes for sale. Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers. The national median list price fell slightly to $435K in Aug from $440K the previous month, but that remains up 0.7% compared with the same time last year. "Listing prices have been buoyed by scarce inventory and while new home sales have been increasing, construction activity isn’t elevated enough to fully bridge the low inventory gap," the Realtor.com report said.
The housing shortage is getting worse
It seems as though the Fed will pause its rate hikes this month, but the future remains uncertain. Next week, vacationing traders will return bringing more volatility to the stock market.
Dow Jones Industrials
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