To paraphrase one of my favorite movie quotes (from Tommy Boy): There are less orthodox ways to get a good look at a T-bone, but I’d rather take a butcher’s word for it…
Over the past month, we’ve been given the daunting task of deciphering employment and inflationary data points through less conventional sources. Now that the government has reopened, we’ll soon get the opportunity to hear about the T-bone straight from the butcher’s mouth.
This Thursday, we’ll finally receive a review of the September jobs number we missed while the government was shut down (estimated at 55k new jobs added). Albeit somewhat stale, it will be informative for the Fed’s decision in December, given that we finally get the data straight from the butcher’s mouth. In addition, we received ADP (private payrolls) this morning, which showed yet another negative print (although slightly better than expected). The market response was still favorable (rates improved) because it illustrates the weakness we are seeing in the labor market.
The Fed forecast for a cut is sitting at exactly 50/50 today. Given all the uncertainties, it’s no surprise the market is frankly torn. Now that we’ll have some hard data to begin to chew through (PCE inflation later this month), the market will soon be digesting a full belly of data to discern which side of the Fed coin we land on… The question is whether the data will lead to a case of full-blown meat sweats or be absorbed in stride. Given how range-bound the market has been, we have only begun carving into this cow (forgive the crude reference).
Good news today for us is the 4.15 support level on the 10yr has held with a little green on our screen to start the day. As the market gets ready to sharpen it’s knives and loosen it’s belt, we’ll soon find out if there is any meat left on the bone for us to continue positive momentum… Forks up!