The Day Ahead: Jobless Claims, Long Bond Auction, Class A Notification Day
Benchmark interest rates moved mostly sideways overnight but are off yesterday's highs. Equity futures are moving higher Thursday, continuing on from the minor rally seen in the final hour of a trading yesterday afternoon.
Just over one hour before the opening bell, S&P 500 futures are 4.00 points higher at 1,232.00 and Dow Futures are 30 points higher at 11,398. The S&P 500 has jumped 3.27% since Nov. 29.
The yield on the 10-year Treasury is three basis points lower at 3.24%, retracing half of the seven-point loss to 3.27% on Wednesday. The Fannie Mae 4.0 is +5/32 at 99-23 and the Fannie Mae 4.50 is +3/32 at 102-19
Light crude oil is trading 0.37% up at $88.64 per barrel, while gold prices are 0.21% higher at $1,386.30 per ounce.
The day ahead is thin on data, but some economists believe the weekly jobless claims report is especially important given the disappointing jobs report for November, released last Friday.
“This morning’s jobless claims report is the most important piece of data in what has otherwise been a pretty barren week,” said Joseph LaVorgna, chief U.S. economist at Deutsche Bank.
“Claims are one of the best leading indicators of the labor market, and their inability to move significantly lower earlier this year proved to be a presage of the modest private job gains to date (averaging just +106k per month),” he added. “Claims had been essentially range-bound between 490k and 450k for most of the year, but over the past month, the 4-week moving average has dipped below 450k.”
Key Events Today:
8:30 ― Jobless Claims are anticipated to fall 10k to 426k in the week ending Dec. 4. The previous week saw initial claims rise 26k, well above the consensus call but low enough for the market to remain overconfident for the November jobs report a day after. In light of that disappointing release, many will be watching the initial claims figure.
The four-week average is currently at 431k ― the lowest since late August 2008 ―
as initial claims have come in below the 450k mark for four consecutive weeks now, suggesting a growing labor market. Continuing claims ― a tally of those still receiving regular benefits ― are anticipated to fall to 4.25 million from 4.27 million.
Economists at Nomura say the previous week’s rise in claims was greater than anticipated, but reiterate that the trend is still heading downwards.
10:00 ― In the Wholesale Trade report for October, inventories are anticipated to rise 0.9%, following the 1.5% boost in September, while sales are forecast to rise 0.6% after a 0.4% gain a month before. Inventories have been rising at an average of 0.7% for the last nine months, according to BBVA, who look for the trend to slow down in the coming months.
“Over the last three months, wholesale inventories increased by 4.3%, which was the fastest three-month growth rate in the history of the series,” said economists at Nomura. “Why wholesalers have begun stock-building at such a rapid pace remains a puzzle. The gains have been broad-based across categories and look mostly unrelated to commodity price increases. We suspect solid growth in trade volumes may be partly to blame.”
Treasury Auctions:
- 1:00 ― 30-Year Bonds
Other Events...
10:15 ― Fed buys $7-9 billion in Treasury coupons maturing between 06/30/16 and 11/30/17
Also, today is class A notification day in the TBA MBS market.