Yields unchanged as markets await Hormuz verdict. Treasury yields ended the day nearly flat, after declining over the prior two sessions, as markets await an official deal to reopen the Strait of Hormuz, following reports that Oman and Iran had agreed on a transit route. The 2-year yield closed 1bp lower at 4.18%, while the 10-year yield closed flat at 4.61%. Meanwhile, equities fell, led by a nearly 14% slide in SpaceX, with the S&P 500 and NASDAQ closing 0.17% and 0.83% lower, respectively. WTI crude is now trading ~1% lower, around $75 per barrel.
Services PMI expands for 24th consecutive month. ISM Services PMI came in at 54.1 in July, below expectations of 54.5 but above the prior period’s 54.0, marking the 24th consecutive month of expansion. Just four of seventeen categories contracted, including healthcare and social assistance. New orders rose 2.1 points to 57.2, while employment fell 3.8 points to 47.4. Prices paid increased notably to 70.3 from 67.7, a sign of ongoing inflationary pressures. Steve Miller, chair of the ISM Services Business Survey Committee, noted that “tariff impact and the Middle East conflict continued to be mentioned by respondents, but much less frequently than in prior reports.”
ADP data points to steady employment. ADP data showed private US payrolls added 44k jobs in July, below forecasts of 65k and the prior period’s 95k. Education and health services drove the gain, adding 36k jobs, while leisure and hospitality positions fell 11k. Wage growth among job switchers reached 7%, its highest level in nearly a year. Friday’s nonfarm payrolls report is expected to show 80k jobs added in July, above the 49k added in June. A strong reading would give the Fed additional room to keep its focus on inflation, and would reinforce Chair Warsh’s description of a “solid” labor market at last week’s post-FOMC press conference.
