Linea Mercati Interview 4/4/23
April 4, 2023
Two-year Treasury yield edges up to 4.08%, the highest in a week, as traders eye inflation data due Friday
April 5, 202304-Apr-2023 11:32:02 AM
- Main U.S. indexes modestly red: DJI off ~0.6%
- Industrials weakest S&P 500 sector; comm svcs leads gainers
- Euro STOXX 600 index ~flat
- Dollar, crude dip; gold, bitcoin gain
- U.S. 10-Year Treasury yield falls to ~3.36%
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TUESDAY DATA: A SPOONFUL OF MEDICINE HELPS THE SUGAR GO DOWN (1130 EDT/1530 GMT)
Data released on this two-for-one Tuesday suggested the economic poison pill prescribed by the Federal Reserve is starting to pack a punch.
But is that pill too poisonous?
The number of unfilled jobs in the United States plunged by 6% in February to 9.931 million, the lowest number since May 2021.
The Labor Department’s Job Openings and Labor Turnover Survey (JOLTS), USJOLT=ECI a gauge of labor market churn, also showed little change in hires and fires, but a modest uptick in the quit rate.
But the plunging job openings is the star of this show, providing welcome news that cracks are beginning to appear in the tight labor market.
Any cooling in worker demand would seem to portend continued deceleration of wage growth – a major inflation driver – and offer another welcome bit of evidence that Powell & Co’s restrictive policies are slowly working their magic.
But fears that the Fed’s magic will conjure the specter of recession are growing.
“Jobs are tightening and that means sooner or later we’re going to see a strong reversal in employment,” says Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “It means we’re not far from recession.”
“While some recent numbers suggest the economy could escape it, a global recession is still on the table,” Cardillo added.
That’s exactly what’s expected from the March jobs report due on Friday. The consensus estimate shows hourly wage growth cooling on an annual basis to 4.3% from 4.6%.
That report, which falls on a market holiday, is expected to have added 240,000 jobs last month, with the unemployment rate holding firm at 3.6%.
Under the magnifying glass, job openings fell most in professional/business services, healthcare and transportation. But construction, arts/entertainment and recreation – saw increased openings.
It should be noted that the report covers a period prior to the recent skittishness over bank liquidity.
Separately, new orders from U.S. factories USFORD=ECI decreased by 0.7% in February, a bigger drop than the 0.5% projected by economists.
This jibes well with the Institute for Supply Management’s PMI data released on Monday, which showed U.S. factory activity contracted in March for the fifth consecutive month.
New orders for core capital goods USNDCG=ECI – which exclude aircraft and defense items, and are considered a barometer of U.S. business spending intentions – were revised to show a 0.1% dip, a reversal from the 0.2% gain originally reported.
While “bad news is good news” has been a recent mantra, today’s bad news is bad news, as far as Wall Street is concerned.
All three major U.S. stock indexes are now red, with cyclicals weighing heaviest.
