Weekly Market Update

7/9/19
The employment report’s impact 
The markets are still sorting out Friday’s impressive employment report, which lifted treasury yields and mortgage rates off recent lows. The US economy added 224k nonfarm jobs in June versus economists’ estimates of 160k. But despite the positive headline number, the unemployment rate ticked up by a tenth of a percent, and average hourly earnings ticked down by the same increment. 

Rates remain anchored 
While the market’s response had a lot to do with thin liquidity following the 4th of July, rates are still anchored around 2.0% on the 10yr note, as we walked into a 10yr yield of 2.02% this morning – firmly in the middle of the recent trading zone of 1.96% to 2.17%. Though Friday’s employment report shows potential, the rally has always been about trade wars and global economic slowdown. In order for rates to move substantially lower, we’ll likely need the first Fed rate-cut officially on the books.

On the horizon 
This week brings plenty of opportunities to hear from Fed officials about preemptive rate cuts (again, domestic economic data looks good compared to data from the rest of the world) starting with the minutes from the last Fed meeting. On Wednesday, we get the Fed Chairman Jerome Powell’s semiannual monetary policy testimony to the House, followed by his address to the Senate on Thursday. The economic calendar is full of Fed-relevant data as well, including: Consumer Price Index, Producer Price Index and Real Avg Hourly Earnings. Right now, the yield on the 10yr note is hanging around 2% at 2.03 and mortgages are up a tick on the day. 

Economic Indicators 
Fed Funds: 2.40% 
1 YR Libor: 2.19% 
30 YR Bond: 2.51% 
10 YR Note Rate: 2.03% 
Dow Jones: 26,788 pts. 
S&P 500: 2,978 pts. 

Whole Sale Trade Sales MoM: 7/10 Prior: -0.4% Survey: 0.3 
FOMC Meeting Minutes: 7/10 
CPI YoY: 7/11 Prior: 1.8% Survey: 1.6% 
Initial Jobless Claims: 7/11 Prior: 221K Survey: 221K 
PPI Final Demand YoY: 7/12 Prior: 1.8 Survey: 221K

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