Daily Market Color

Mixed Data Ahead of Tomorrow’s Payrolls Report

US Stocks declined while Treasuries rallied marginally as investors digested a mixed batch of economic data and set up for tomorrow’s jobs report.  Now that oil prices and Chinese stocks have found some resemblance of stability, investors are refocusing on US fundamentals and the Fed.  Headwinds still remain, but recent data has shown many sectors of the US economy are on steady footing and today’s economic releases were largely consistent with that theme.  Data showed the number of Americans filing for jobless claims benefits unexpectedly rose last week, but the less volatile four-week moving average of claims declined to the lowest level since late November.  Claims have been below the 300,000 threshold associated with a healthy labor market for the past year, the longest period since the early 1970s.  A separate report showed announced layoffs by US companies fell by 18% in February, where a large number of the cuts remained contained in the troubled energy sector.  The one blemish on today’s labor data was the ISM’s services index, which showed employment fell 2.4% to a reading of 49.7.  Previously, the service sector largely avoided the cutbacks we’ve seen in the manufacturing sector.  Other data showed factory orders in January rose less than expected.

Dallas Fed President Kaplan spoke today and called on central bankers to be patient when it comes to raising rates.  Kaplan said he expects the US economy to be “resilient” this year, but that tightening global financial conditions have reduced the need for the Fed to move away from its highly accommodative monetary policy.  Kaplan however, believes the consumer is in “pretty good shape” and it will be interesting to see if a robust payrolls number tomorrow forces him to take a less dovish stance.

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