Markets still feasting
Weekly Bond Commentary
Markets shook off the turkey hangover and came back ready to move higher.
A disappointing monthly employment report released Friday was not enough to derail risk markets, as Treasury yields moved higher and stock prices reached all-time highs. Against the backdrop of slightly softer manufacturing data and modestly better weekly jobless claims, markets chose to focus instead on the potential for imminent vaccine rollouts to combat the coronavirus.
The November labor report showed 245,000 added jobs, well below estimates and significantly lower than October’s 610,000 gain. The unemployment rate did continue to ease lower, from 6.9% last month to 6.7% in November, but that’s a small comfort compared to 3.5% before the pandemic hit. The economy is slowing, but activity in the fourth quarter is quite a bit higher than in the third, pointing to a stronger gross domestic product reading. Market estimates are for a 4% fourth-quarter gain. That would be well above trend, reflecting the ongoing healing following the disastrous drop in the first and second quarters.
Much of this healing was made possible by congressionally approved fiscal stimulus programs enacted during the early days of the pandemic. As many of these programs have expired, with more to end Dec. 31, pressure is mounting on Congress to enact additional stimulus to further bridge until vaccinations become widespread.