Wall Street is deeply underwater with the major indices all suffering losses in the -1.2% to -1.4% neighborhood, though after recent all-time highs.
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Investors are asking, “Why is the market down?” The answer is that the driver of today’s stock sell-off appears to be mostly growing angst over the economic recovery, as Delta variant covid infections continue to rise globally.
We read last week that Covid D was not any more dangerous than the original Chinese Covid, but now we see lockdowns again.
The Dow is -460 points lower just over 34,200, while the S&P 500 is down -60 points to 4,298. The NASDAQ has shed -197 points to 14,468. Broad risk-off conditions have weighed on the markets, with safe-haven flows into Treasuries taking yields to multi-month lows.
A couple of weeks ago, the equity market would have cheered lower yields, though it appears the market has shifted to a more traditional outlook, of risk-off equated to lower yields and lower stocks.
It appears the market is now fearful, but I expect it to bounce back once the Fed steps in. Speaking of the Fed……..
Fed announced it will gradually begin selling its corporate bond holdings beginning July 12. This action was previously suggested with the June 2 announcement of portfolio sales, but the Fed is giving more details.
The Fed began liquidating some of its ETFs from the SMCCF (Secondary Market Corporate Credit Facility), one of the many emergency credit facilities it created. The SMCCF held about $13 bln incorporates and ETFs. The Fed stressed in its prior announcement that these operations have no policy implications.
The 2k initial claims uptick to a tighter than expected 373k in the first week of July trimmed declines of -45k last week to a 371k (was 364k) cycle-low, and of -2k to 416k (was 415k). Continuing claims fell -145k to a tighter than expected 3,339k, after last week’s 72k rise to 3,484k (was 3,469k). The insured jobless rate fell to a 2.4% new cycle-low from a 2.5% prior low over the last four weeks.
The lean initial claims trajectory and resumed continuing claims downtrend leave an encouraging path for the claims data over the last four weeks. Initial claims are entering July below prior averages of 393k in June, 428k in May, and 582k in April.
The July BLS survey week reading will likely undershoot recent survey week readings of 418k in June, 444k in May, and 566k in April. Continuing claims are poised to fall about -150k between the June and July BLS survey weeks, after drops of -199k in June, -42k in May, -188k in April, and -628k in March. Our July nonfarm payroll estimate sits at 600k.
An executive order tasking the Federal Maritime Commission and the Surface Transportation Board to address shipping prices is expected this week. The order is expected to cite the small number of ocean and rail shipping companies as engaging in anti-competitive pricing practices. The Federal Trade Commission is also expected to adopt rules limiting non-compete clauses and banning unnecessary occupational licensing requirements, affecting more than 30% of the workforce.
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