Will the Stock Selling Continue?
With a two-day stock correction ending last week it will be interesting to see if the selling continues into this holiday-shortened week. It’s also a quiet period for the Fed before the September FOMC meeting so little in the way of Fed speak will be in the offing should the selling turn more severe. Futures point to a lower open with the Dow off around 214 points. If the selling continues it will provide a positive backdrop for Treasuries but price gains there are likely to be grudging with the Treasury coming to market this week with $35 billion in 10-year notes and $23 billion in 30-year supply. August CPI numbers will be released on Friday and they are expected to up for the month but not to the extent they were in July. Year-over-year numbers are expected to remain somewhat docile with overall CPI up 1.2% after last month’s 1.0% result and core CPI is expected to remain at 1.6% for the second straight month. The July JOLTS report is expected to show job openings totaling 6.00 million versus 5.89 million in June. Compare those job opening numbers to the 13.5 million unemployed from the August jobs report and you have more than two unemployed for every job opening. That fact, and the modest inflation numbers, will keep the Fed in full accommodative mode for the foreseeable future.
|Treasury Curve||Today||Week Change|
|3 Mo LIBOR||0.25%|
|6 Mo LIBOR||0.29%|
|12 Mo LIBOR||0.42%|
|Date||Statistic||For||Briefing Forecast||Market Expects||Prior|
|Sep 8||NFIB Small Business Optimism||Aug||99.0||00.2 actual||98.8|
|Sep 9||JOLTS Job Openings||Jul||6.00mm||6.00mm||5.89mm|
|Sep 10||PPI Final Demand YoY||Aug||-0.3%||-0.3%||-0.4%|
|Sep 10||PPI Ex Food and Energy YoY||Aug||0.3%||0.3%||0.3%|
|Sep 10||Initial Jobless Claims||Sep 5||845k||845k||881k|
|Sep 11||CPI YoY||Aug||1.2%||1.2%||1.0%|
|Sep 11||CPI Ex-Food & Energy YoY||Aug||1.6%||1.6%||1.6%|
|Sep 11||CPI MoM||Aug||0.3%||0.3%||0.6%|
|Sep 11||CPI Ex-Food & Energy MoM||Aug||0.2%||0.2%||0.6%|
Top 5 Events for the Week
Sept. 8 — Sept. 11, 2020
1. Market & DC Developments—All Week
2. August CPI Report—Friday
3. July JOLTs Report—Wednesday
4. August NFIB Small Biz Optimism—Tuesday
5. Jobless Claims—Thursday
With a two-day stock correction ending last week it will be interesting to see if the selling continues into this holiday-shortened week. It’s also a quiet period for the Fed before the September FOMC meeting so little in the way of Fed speak will be in the offing should the selling turn more severe. With the stimulus bill 2.0 dead for now, the focus will shift from bill-watching to signs that the fading stimulus is starting to show in consumer behavior and hard data. The jobs and ISM reports were another in a string of reports, however, that failed to show flagging momentum, generally speaking.
2. August CPI Report—Friday
Inflation has been mentioned as a latent threat given all the stimulus provided to the economy and monetary accommodation provided by the Fed, and certainly if the virus news were to improve and a V-shaped recovery ensued, the threat would increase. For now, however, there’s not much life in inflation readings and that will likely continue to be the case for many more months. Overall CPI is expected to increase 0.3% versus a 0.6% pop in June and July. The core rate (ex-food and energy) is expected to be up 0.2% versus a 0.6% stunner in July. YoY CPI is expected to be 1.2% after last month’s 1.0% result. Core CPI YoY is expected to remain at 1.6% for the second straight month. With docile YoY numbers, inflation may be something to expect at some point but that’s probably next year’s story, not 2020. And with the Fed’s New Monetary Policy Framework, if Core YOY does climb over 2% the Fed is likely to let it be.
3. July JOLTS Report—Wednesday
In addition to the jobs report the Job Openings and Labor Turnover Survey provides some additional labor market details. The issue is, however, it’s always a month behind its more famous labor report sibling. In any event, the July report is expected to show job openings totaling 6.00 million versus 5.89 million in June. Compare those job opening numbers to the 13.5 million unemployed from the August jobs report and you have more than two unemployed for every job opening. That’s another reason to expect the Fed to remain in full accommodative mode for the foreseeable future.
4. August NFIB Small Business Optimism—Tuesday
In the field of confidence readings the Conference Board’s Consumer Confidence Report and the University of Michigan Consumer Sentiment Survey are the two biggies, but in the field of small business confidence the NFIB report carries the day. The report was released this morning and posted a 100.2 reading for August, beating the 99.0 expectation and a modest improvement from the 98.8 reading in July. It got as high as 108.8 back in August 2018 and dipped to 90.9 in April. The average over the past two years is 100.7 so while there has been some improvement optimism is still shy of the average.
The weekly change in initial jobless claims continues to be the best real-time indicator of how the economy is recovering. The Bloomberg consensus expects jobless claims for the week ended September 5 to be 845 thousand, down slightly from 881 thousand the previous week. Continuing claims are expected to be 12.9million versus 13.3million the prior week. That expected decline, albeit slight, is appreciated but sobering when considering this week’s JOLTs Report is expected to show only 6.00 million available jobs.
Thomas R. Fitzgerald
Director, Strategy & Research