Today’s Spotlight Market
Following the ADP Research Institute?s estimate of 200,000 private sector jobs added in September, here are economists? estimates for key data points for this morning?s release of September Non-farm Payrolls data from the U.S. Bureau of Labor Statistics.
Non-farm Payrolls: September +205,000 vs. August +173,000
Unemployment Rate: September 5.1% vs. August 5.1%
Hourly Earnings: September +0.2% vs. August +0.3%
Average Workweek: September 34.6 hours vs. August 34.6 hours
Fundamentals
Ever since the Federal Reserve ?punted? on a decision to raise interest rates at the September Federal Open Market Committee Meeting (FOMC), we have seen several Fed officials state that there is likelihood that interest rates will be raised before the end of the year. Those speaking in favor of a rate hike note increased consumer spending, an improving housing and labor market, as well concerns of ?falling behind the curve? as far as the potential for rising inflation in the coming months. However, it appears that market participants see the Fed as ?all talk and no action? as far is an interest rate hike in 2015, with Fed Fund futures currently pricing in only a 14% chance of a rate hike at the October FOMC meeting, and a 44% chance at the December meeting.
While we have all heard that the Fed is ?data dependent? some very recent data does cast some doubts to on the strength of U.S. economic activity. Just yesterday for instance, the ISM manufacturing index fell to its lowest level in nearly 2 ? years, as the index fell to a reading of 50.2 in September from 51.1 in August. While a reading in the index above 50 does represent expansion in the manufacturing sector index, the overall trend in expansion has slipped the past 3 months. In addition, Jobless claims last week rose more than forecast, jumping by 10,000 to a seasonally adjusted 277,000. While the unemployment rate continues to fall, the so called U6 employment rate, which includes, marginally attached and those working part-time for economic reasons, is over double the ?official? and well publicized U3 employment rate of 5.1%.
Given that only one voting member of the FOMC voted against keeping rates unchanged at the September meeting, I can see where traders might remain skeptical that we will see enough ?positive? data in the 4th quarter to convince the Fed that the U.S. economy is on solid enough footing for? even a 0.25% hike in December.
Technical Notes?? -? View Today’s Chart
Today let?s take a look at the shorter end of the yield curve with the daily continuation chart for 5-year Note futures. We notice the market has been in a general uptrend since June, having peaked with the severe stock market selloff on August 24. Current price levels are above both the 20 and 200-day moving averages and the 14-day RSI is relatively strong with a current reading of 60.67. 120-24 is seen as the next resistance level for the December futures, with support found at 119-24.25.
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