The equity and Treasury markets were bifurcated yesterday. Equites were initially lower as the ADP Private Sector Employment Survey indicated that hiring is still robust, exceeding all estimates. However, equities reversed direction following the release of the ISM Servicing Index that missed expectations and indicated a drop in inflation. The Treasury market however remained down.
Also weighing on sentiment, Fed Bank of Atlanta President Raphael Bostic stated it will likely be appropriate to lower rates only in the fourth quarter—emphasizing the bumpy nature of inflation progress. Bostic is emerging as a hawk.
FRB Chair Powell statements were largely regarded as a nonevent, reiterating it is too soon to lower rates but that recent data has not changed the overall picture for the Fed. The data will decide monetary policy.
Tomorrow is the release of the BLS Employment report. Will it validate the unexpected strength in the ADP Data?
What will happen today?
Last night the foreign markets were up London was up 0.42%, Paris up 0.09% and Frankfurt up 0.16%. China was down 0.18%, Japan up 0.81% and Hang Seng down 1.22%. Dow and NASDAQ futures are up 0.25% and 0.4% on FRB Chair’s Powell reassurance of rate cuts later in the year. The 10-year is off 3/32 to yield 4.36%.
Kent Engelke
Chief Economic Strategist Managing Director
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