Happy Saturday, friends! Last week was rather exciting. We had the Fitch downgrade, Apple and Amazon earnings, as well as key labor market data.
The Big Picture
The downgrade dampened positive sentiment in the equity market and pushed bond yields even higher. As a result we saw the yield curve start to push higher from its recent lows.
Here are some of the highlights from Fitch. It's hard to disagree with anything they're saying. Any objective observer would state that this is a very reserved and polite take on just how dysfunctional and incompetent the legislative branch has become.
In some countries if the government can't figure out its budget or how to fund it, the entire legislature is fired and replaced.
The labor market showed some signs of slowing as NFP came in at just 187K with the prior month revised down to a similar level. In fact, we've had six months of negative revisions on NFP data.
Job openings, hires, and separations all fell according to JOLTS data as well, suggesting that fewer are quitting their jobs as conditions become somewhat less favorable. Anecdotal data also suggests more job applicants are seeing a rather competitive hiring process.
On the other side of that, however, jobless claims have been trending a bit lower, and we've yet to see the services industry meaningfully buckle. As a result it's too early to say that we're seeing a real slowdown. The data needs to demonstrate a trend across multiple points to demonstrate that conclusively.
Meanwhile, in Japan, which has become the poster child for monetary policy trial and error, an early attempt to normalize yields on the long-end by the BoJ has been met with not one, but two publicly announced market interventions to ensure yields didn't rise too rapidly on the 10-year JGB.
Between the BoJ and Fitch downgrade, US real yields soared to the highest levels since 2011, when there was a global sovereign debt debacle. Rising real yields could put pressure on other long duration assets, like tech and growth stocks, crypto,