US Economy and Credit Markets Ended Sept. 9, 2016

Yields rose sharply on Thursday as the ECB's Mario Draghi showed no intention of expanding bond purchases from current levels. Two weeks ago, on August 26, his American counterpart Janet Yellen had noted that "the case for an increase in the federal funds rate has strengthened in recent months" but since then, there has been a relatively disappointing payroll report, a decline registered in the ISM manufacturing report and a decline registered in the ISM non-manufacturing report. As a result, the probabilities of a US Federal Reserve September rate hike have been very volatile and despite Chair Yellen's hawkish Jackson Hole talk; implied probabilities are currently only forecasting a 60% chance of a rate increase by year's end. Oil surged on Thursday, as data reflected a sharp decline in inventories which experts attribute to Hurricane Hermine delaying shipments from reaching US ports, before giving much of the gain back on Friday. As alluded to above, Tuesday's ISM non-manufacturing index report disappointed as it registered a decline to 51.4 from July's 55.5. A reading above 50 still signals expansion and this was the 79th consecutive month of expansion registered in the service sector. Thursday's Jobless Claims report showed filings for unemployment benefits dropped and the unemployment held firm at 5%. Major economic reports (and related consensus forecasts) for the upcoming week include: Wednesday: prior week MBA Mortgage Applications; Thursday: August Retail Sales (-.1%, -.1%), prior week Initial Jobless Claims (265K, +6K), August PPI Final Demand (.1%, +.5%), and August Industrial Production (-.2%, -.9%); Friday: August CPI (.1%, +.1%) and September's preliminary University of Michigan sentiment reading (91, +1.2).
Posted on Monday, September 12, 2016 @ 8:01 AM

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.