The US equity market is flat today, which is expected because of the holiday. Initial Jobless Claims dropped, but the Treasury auctions were rather disappointing. We are watching for a dip to happen in the next few weeks because of major asset managers due to allocation rebalancing that will sell-off positions.
10:21 ET Treasury’s $65 bln bill auctions were poor, suffering from the lack of liquidity in thin holiday markets.
Demand is also likely to fade a bit on the assumption that more supply will be coming to fund the expected stimulus deal. The $30 bln 4-week offering stopped at 0.080%, through the 0.085% at the deadline. It’s the same award rate from last week. There were $89.9 bln in bids for a 3.06 cover, below the 3.37 from last week and the 3.42 average. It is the weakest since August 27. Indirect bidders accepted only 28.1%, well off of the prior 41.8% and below the 33.3% average. It is the lowest since November 12. The $35 bln 8-week bill was awarded at 0.085%, also through the 0.090% at the deadline. And it’s a little richer than the prior week’s 0.090%. Bids totaled $98.1 bln for a 2.84 cover ratio, also considerably below last week’s 3.27 and the 3.34 average. It is the worst since late June. Indirect bidders took 35.6%, less than the prior week’s 49.2% and 44.2% average. It’s the lowest since November 19.
09:01 ET Treasury Action: the markets are mostly static and trading around unchanged levels as activity winds down for the year.
The markets are a little cheaper on some last-minute back-and-forth. The 10-year rate is at 0.933%, with the bond at 1.672%, and the 2-year at 0.121%. The Dow and S&P 500 minis are slightly lower at 30,286 and 3721, respectively, and the NASDAQ is a touch firmer at 12,848. The focus remains on the immediate concerns over the surging virus cases and the new strains which have resulted in renewed and more stringent mitigation measures that are adding to concerns over a slowing in growth momentum. Those fears are being offset by vaccines that are supporting a more optimistic medium-term outlook. U.S. stimulus has been disappointing, but expectations are for a bigger package next year, with the Fed maintaining its uber-accommodative stance for years to come.
09:00 ET Equity futures are little changed, as light holiday volume has become even lighter.
The Dow mini is -0.07% lower, the S&P 500 mini has dipped -0.08% and the NASDAQ mini is 0.07% firmer in pre-market futures trading. Modest 0.1% to 0.2% gains were on offer yesterday in regular trading on Wall Street. The Dow made its 13th high for the year on Wednesday. Remarkably, the three indexes together managed to set 100 record closing highs this year. Stocks have had a stellar year, driven by the stimulus, Fed accommodation, and (eventually) the roll out of vaccines. The Brexit compromise has also been supportive of risk this past week. The launch of vaccination campaigns in the U.S. and Europe has allowed investors to look past near-term uncertainty as virus cases and restrictions surge — a return to normal activities is anticipated by the middle of next year. Of course, renewed worries over the new virus strains and more stringent lockdowns will be headwinds early in the New Year.
08:45 ET The -19k initial claims drop to 787k in the Christmas week extended the -86k plunge to 806k (was 803k) last week.
Claims on an NSA basis fell -32k to 841k, after last week’s big -69k drop to 873k (was 869k). The declines further trimmed the net initial claims up-tilt with rising coronavirus restrictions, though we attribute the big swings since Veteran’s Day primarily to arbitrary seasonal adjustment during this odd holiday period. Continuing claims fell -103k to 5,219k after a -185k drop to 5,322k (was 5,337k). The insured jobless rate sustained last week’s drop to 3.6%, versus a 17.1% peak in May and a 1.2% cycle-low for nearly two years ending in mid-March. Initial claims are averaging 835k in December, versus lower prior averages of 749k in November and 786k in October, but a higher 865k in September. The 892k December BLS survey week reading exceeded recent survey week readings of 748k in November, 797k in October, and 866k in September. Continuing claims fell -767k (was -752k) between the November and December BLS survey weeks. We saw prior drops of -1,734k in November and -4,924k in October. We will leave our December nonfarm payroll estimate at 100k.
08:36 ET Initial claims declined -19k to 787k in the week ended December 26, lower than expected.
This follows the -86k plunge to 806k (was 803k) previously which unwound about half of the gains over the prior two weeks to 892k that was the highest since September 4 as the spike in virus cases has seen some renewed shutdowns and layoffs. The 4-week moving average edged up to 836.8k from 819.0k (was 818.3k). Claims not seasonally adjusted slid another -31.7k to 841.1k after dropping -69.1k to 872.8k (was 869.4k). Continuing claims fell -103k to 5,219k in the December 19 week after declining -185k to 5,322k (was 5,337k). The insured unemployment rate was steady at 3.6%.
