Mid-Morning Look: July 05, 2019

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Mid-Morning Look

Friday, July 05, 2019

Index

Up/Down

%

Last

 

DJ Industrials

-191.29

0.71%

26,774

S&P 500

-23.95

0.80%

2,971

Nasdaq

-66.77

0.82%

8,103

Russell 2000

-12.47

0.79%

1,559

 

 

U.S. stocks are pulling back after touching record highs for the Dow Industrials, S&P 500 index, Nasdaq Composite and Nasdaq 100 on Wednesday, as a stronger than anticipated bounce in June jobs data has partially reduced the probabilities of a Fed rate cut later this month. The bigger story today remains the drastic decline in Treasury prices and spike in yields rose along with the dollar on the jobs data, with the 10-year, 2-year and 5-year yields all rising more than 10 bps. Earlier today on TV, White House advisor Larry Kudlow said the Federal Reserve should take back its rate hike from December and reduce interest rates even though the economy is strong and the latest payrolls report was positive. Outside of the headline jobs report and the moves in Treasuries, gold and the dollar, stock volumes are light after yesterday’s 4th of July market closure led to a long vacation weekend for many. Nearly all S&P sectors are trading lower, outside of the banking/financial sector, led by declines in interest rate sensitive names (utilities, housing, telecom and REITs). 

 

Treasuries, Currencies and Commodities

·     In currency markets, the British Pound falling to lowest levels since early January, dropping to the 1.25 level vs. the US dollar (-0.55%) as the greenback spikes vs. most rival currencies on better headline jobs report. Commodity prices mixed with WTI crude down but Brent higher and gold prices drop nearly 2% given the spike in the dollar and lowered chances of reduced interest rates. Treasury yields bouncing following the mixed jobs report – (better headline jobs added, rising unemployment rate and wages rise 0.2%, less than expected) – has the 10-yr yield back above the 2.05% level with the 2-yr jumping over 11 bps to 1.865%

 

Economic Data

·     Jobs data was mixed as Nonfarm payrolls for June reported at 224K vs. est for 160K (prior revised to 72k from 75k) while private payrolls at 191K vs. est. 150K (prior to 83k from 90k); manufacturing rises 17k vs. est. 3k and the unemployment rate rises to 3.7% from 3.6%; average hourly earnings rise 0.2% less than the est. 0.3% (and YoY holds at 3.1% vs. est. 3.2%)

 

 

Macro

Up/Down

Last

 

WTI Crude

-0.23

57.11

Brent

0.64

63.94

Spot Gold

-23.50

1,392.30

EUR/USD

-0.0007

1.1214

JPY/USD

0.73

108.56

10-Year Note

0.108

2.058%

 

 

Sector movers

·     Retailers were one of the few bright spots on the day, with underperforming department stores such as M, KSS, JWN leading the group higher

·     Interest rate sensitive homebuilders (BZH, DHI, LEN, PHM, TOL) declined given the spike in Treasury yields

·     Oil is set for the biggest weekly decline since May as global demand concerns outweighed an OPEC+ pact to extend supply curbs into 2020

·     Bank movers; shares of banks and brokers outperform following the jobs report and subsequent rally in Treasury yields as the data pointed

·     The Philly semi index (SOX) down -1.4% to around the 1,450 level – pulling back from earlier week hi’s of 1,531.37 on 7/1 after the announcement of the China/US trade truce last weekend

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Market commentary provided by Hammerstone Markets, a division The Hammerstone Group, a firm separate from and not affiliated with Regal Securities L.P. Regal Securities L.P. has not participated in the creation of the content, and does not explicitly or implicitly endorse the content.

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