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Powell’s Dovish Comments Continue to Send Rates Lower

Powell’s dovish comments from Friday continue to send rates lower

The dovish sentiment from Fed Chair Powell’s comments at the Jackson Hole policy conference carried over to today’s session, with Treasury yields and swap rates ending the day 1-4 bps lower – the 10-year closed 3 bps lower at 1.28%.  Major equity indices ended mixed – the DJIA declined 0.2%, while the Nasdaq rose 0.9%.  The S&P 50 added 0.4% to hit its 53rd record high this year.

Pending home sales index fell 1.8% in July, well below the +0.3% forecasted level

The index, which measures contracts to purchase previously owned homes, declined for a second consecutive month due to low supply.  Rising home prices did not seem to deter buyers, with low mortgage rates continuing to drive demand.  The index can be interpreted as a forward-looking indicator of the health of the housing market, as contracts convert to sales in one to two months’ time.  Despite the bleak outlook, the National Association of Realtors’ chief economists Lawrence Yun believes the supply squeeze is temporary, adding “home shoppers should begin to see more options in the coming months.”

COVID-19 cases continue to rise globally

Earlier today, the WHO warned fatalities in Europe would rise by 236,000 by December 1st, while Dr. Anthony Fauci forecasted an additional 100,000 in the US in the same time frame.  Vaccination rates have largely stagnated over the past few weeks with only 52% of the US population vaccinated, with Fauci commenting that the recent spike is “both entirely predictable [and] entirely preventable.”  As cases continue to rise, countries have been imposing restrictions, with the EU most recently recommending halting non-essential travel from the US.

What to look for this week

The marquee data release of this week (and potentially month) will be the August jobs report on Friday, the importance of which has surged with Powell stressing the Fed’s data-dependent direction.  Leading up to the payroll figures, the August consumer confidence index will be released on Tuesday, the ADP private payrolls estimate on Wednesday, and weekly jobless claims on Thursday.

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