Stock indexes at 8:00 am ET, before the March ADP private jobs data; the DJIA -850. At 8:15 am ET, ADP reported private jobs down just 27K, much stronger than estimates that were looking for losses of 180K jobs. A bit surprisingly, the reaction to the lower job losses didn’t initially help equity markets. Total focus today is on the comments from yesterday’s virus update at 5:30 pm ET. President Trump used words he has never uttered before, that the next two weeks will be hell for the virus spread and new forecasts that 100K and 240K US deaths expected now as the spread multiplies and people being encouraged to stay at home. Trump largely abandoned his optimistic tone, telling the US to brace for one of its toughest stretches as a nation. “This is going to be a painful two weeks,”…… “Our strength will be tested; our endurance will be tried.”… “We’re going through the worst thing that the country’s probably ever seen.” The phrase social distancing has now taken on a new name, yesterday the new definition changed to mitigation.
The death count will peak by April 15, a University of Washington study predicted. NYC reported 1,096 deaths as of 4:30 pm ET yesterday, up from 932 in a morning update. What forecast is correct isn’t encouraging? The talk of 240K deaths or this one serves to remind the uncertainty. Global toll: Cases topped 860,000 and deaths passed 42,300, John Hopkins University data show. Spain had 864 new fatalities, marking its deadliest day, as confirmed cases surged past 100,000. Italy will extend its nationwide lockdown to April 13, warning relaxing rules too early could undo efforts to halt the spread. China reported 130 asymptomatic infections.
ADP reported much better private jobs numbers than markets were expecting. Private jobs declined just 27K according to the release on forecasts of a drop of 180K.
Earlier this morning, another better than expected report from MBA on weekly mortgage applications. Overall mortgage apps increased 15.3%, purchases were down 11.0%, but refinancing continues to increase +26.0%.
At 9:30 am ET,the DJIA opened -850, NASDAQ -217, S&P -95. 10 yr at 9:30 0.60% -8 bps. MBS FNMA 3.0 coupon +8 bps from yesterday’s close and +9 bps from 9:30 yesterday.
At 9:45 am ET, the March PMI manufacturing index was 48.5 as forecast and down from 50.7 in Feb. UK’s March Manufacturing PMI fell to 47.8 from 51.7 (expected 47.0). France’s March Manufacturing PMI fell to 43.2 from 49.8 (expected 42.9). Italy’s March Manufacturing PMI fell to 40.3 from 48.7 (expected 40.5). Spain’s March Manufacturing PMI fell to 45.7 from 50.4 (expected 44.0). Swiss March procure.ch PMI fell to 43.7 from 49.5 (expected 40.0).
At 10:00 am ET, the ISM March manufacturing index expected at 44.0 from 50.1 in Feb, as released the index at 49.1. It fell below neutral for the first time in almost three years, registering a 49.1 percent reading in August, down 2.1 points from 51.2 in July. The index is at the lowest reading since January 2016. However, August is the 124th month above the 42.9 percent threshold consistent with expansion in the overall economy. Comments from purchasing executives highlight international concerns, including trade wars and rising tariffs, signs of slowing global growth, and Brexit, along with increased uncertainty regarding the US economy, as significant issues. The New Orders Index dropped 3.6 points to 47.2, the lowest reading since April 2009 during the Great Recession. The weak reading suggests a significant deceleration in demand. New export orders fell 4.8 points to 43.3, also the lowest reading since the recession. The backlog of unfilled orders increased 3.2 points but remained below neutral for the fourth consecutive month, posting a 46.3 reading in August.
Feb construction spending expected +0.7%, as released -1.3%.
Congress and the administration are preparing another $2 trillion of more help, this time for infrastructure funding. A plan similar to the WPA during the depression, providing jobs. The talk now remains political between the two parties on details.
March auto sales will be dribbling out through the day; Chrysler/Fiat down 10.4% on estimates of -7.1%. Auto sales in March will decline, and April isn’t going to be any better. Feb sales were 16.8 mil.
The last month in the MBS markets have experienced substantial price swings, as much as 100 bps a day. Yesterday for the first time in weeks, the trading in the securities appeared to have settled down with no real price changes. This morning the MBS markets are trading quietly; is the chaos lessening? Two sessions aren’t enough to draw conclusions. Nevertheless, it is some comfort not seeing the extreme price changes that have marked the last month.
Source: TBWS
