Daily Market Color

Equities Rise to Record Highs After Jobless Claims Hit a Pandemic Low

DJIA closes at a record high for the second day in a row
Spurring the risk-on sentiment, earlier today the Labor Department reported jobless claims dipped below the 500,000 threshold for the first time since the pandemic began.  US equity indices celebrated the improvement – the S&P 500, DJIA, and Nasdaq rose 0.8%, 0.9%, and 0.4%, respectively.  Treasury yields and swap rates held within a tight range – the 10-year UST yield closed flat at 1.57%.
Jobless claims totaled 498,000 last week, a pandemic low
Initial claims declined by nearly 100,000 last week, beating the Bloomberg estimate of 538,000.  The decline comes a day before the Labor Department’s April jobs report, which is expected to show a 1,000,000 gain in nonfarm payrolls and an unemployment rate of 5.8%.
Robust deposit growth and muted loan growth for small banks in 2Q
The one trend that has become apparent this year is borrowings continue to decrease as banks are using some of their excess liquidity to pay down borrowings. The influx of liquidity doesn’t seem to be ceasing either, with cash growth growing at a faster annualized pace this quarter compared to YTD annualized. On the loan level, large banks are seeing slightly better loan trends compared to small banks (could this be an early sign of the tide turning for loan growth in the industry?). Both C&I and CRE QTD annualized growth is positive for large banks thus far in 2Q at 6.0% and 2.1%, respectively. This is compared to negative C&I and CRE growth YTD annualized for large banks. C&I at small banks has taken a hit in 2Q, and could be attributed to the slowdown in PPP lending post 1Q with negative 24.1% QTD annualized growth. CRE 2Q growth for small banks is currently lagging YTD annualized growth of 1.9% with QTD annualized growth only at 0.29% three weeks into 2Q.
USD/CAD falls to new lows
USD/CAD broke 1.2200 today and is testing 1.2160 lows. Moving forward, keep a close eye on 1.2100 key support levels we highlighted last week, as they could determine if the Canadian currency continues to strengthen against USD.

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