Daily Market Color

Rally Continues in Earnest Ahead of Jobs Report

Yields fall ahead of Friday’s nonfarm payrolls and unemployment data releases. Treasury yields fell across a flattening curve today, the 2-year yield dropping ~8bps to 4.24% and the 10-year yield declining ~10bps to 3.51%. Tomorrow’s jobs report now moves into the focus, where forecasts call for an increase of 200k jobs and an unemployment rate of 3.7%. Though the data may have an impact on the Fed’s terminal rate, markets have effectively locked in a 50bp hike for the December FOMC meeting. 

PCE rises less than forecast, but is a single reading enough? PCE, the Fed’s preferred measure of inflation, came in slightly under expectations today. Headline PCE increased 0.3% MoM in October (vs. 0.4% est.) and 6.0% YoY (vs. 6.0% est.). Headline PCE, which Chair Powell focused on in his speech yesterday, increased 0.2% MoM (vs. 0.3% est.) and 5.0% YoY (vs. 5.0% estimate). Notably, personal spending rose 0.5% in October, the most YTD, due to elevated merchandise spending which was up 1.1% adjusted for inflation.

Day ahead. Nonfarm payrolls and unemployment data will be released at 8:30 AM ET. Chicago Fed President Charles Evans (dovish non-voter) will speak at 10:15 AM ET in an otherwise light schedule for Fed commentary.

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