Update - 9/4/2014
VP/Chief Investment Officer
Well this morning we got the ADP jobs report and they are posting 204K new jobs for July, where expectations were for 220K. To make matter worse, last month was revised down to 212K meaning we posted 8,000 fewer jobs in July than in June. To further drill down in that number, only 78K were small business jobs, which is the engine that fuels the American economy.
Initial jobless claims posted 302K new claims, rising 4,000 from last month. Now the market is down on this news, but not down nearly as much as it would have been with a 330K new claims number. That being said, every time we feel that the jobs picture is improving we get a shot in the heart and this month’s numbers are definitely not positive so far this month. Tomorrow will be the real tell-tale number with nonfarm payrolls posting at 0730 cst. Current expectations are still at 230K, a drop of 21,000 from last month.
In other news, the ECB has made two huge announcements. They have decided to begin their own QE with the buying of asset-backed securities and covered bonds beginning in October, 2014. They have also lowered their rates by 10bps. The benchmark rate was lowered to .05% and their overnight rate was lowered further negative to -.20%. It is interesting to note that of 57 economists polled, only 6 predicted a lowering by 10bps, all other 51 called for no change to rates. What is really interesting here is that the ECB does not have the same ability to affect markets as our own Fed due to Europe’s lack of fixed income size. There is not a massive production of bonds that they can buy up the way our own Fed has done in out numerous QE plans. That being said, they (Europe) finally have a chance to lower the Euro vs. the dollar since we are in the process of stopping out QE, for now.
The markets are obviously not happy with the news both from Europe and form the 2 jobs reports today. Rates are still strong, but not nearly as strong as they were yesterday. Current Treasury yields are lower than we have seen all week.