Updated: 11-17-2014

The Week in Review/Week Ahead
Updated: 11-Nov-14  01:20PM ET
Analyst: Pat O'Hare

Exhale:
  • The Treasury market has been hit hard lately, but on Friday it hit back after the October employment report didn't pack a knockout rate-hike punch
  • If anything, the employment report was more of the same as it showed decent job growth and minimal wage gains
    • Nonfarm payrolls increased by 214,000 (Briefing.com consensus 235,000)
      • September nonfarm payrolls revised to 256,000 from 248,000
      • August nonfarm payrolls revised to 203,000 from 180,000
    • Private sector payrolls increased by 209,000 (Briefing.com consensus 230,000)
      • September private payrolls revised to 244,000 from 236,000
      • August private payrolls revised to 200,000 from 175,000
    • Unemployment rate was 5.8% (Briefing.com consensus 5.9%) versus 5.9% in September 
      • The U6 unemployment rate, which accounts for the total unemployed plus persons marginally attached to labor force and the underemployed, was 11.5% versus 11.8% in September
      • Persons unemployed for 27 weeks or more accounted for 32.0% of the unemployed versus 31.9% in September
    • Average hourly earnings increased 0.1% (Briefing.com consensus +0.2%) after being unchanged in September
      • Aggregate earnings rose 0.6%, which is strong enough to drive an acceleration in consumption growth
      • Over the last 12 months, average hourly earnings have risen 2.0%
    • The average workweek was 34.6 hours (Briefing.com consensus 34.6) versus 34.5 in September
      • Manufacturing workweek was unchanged at 40.8 hours
      • Factory overtime slipped 0.1 to 3.4 hours
    • The labor force participation rate was 62.8% versus 62.7% in September
  • The impression left by the Treasury market is that it dialed back concerns about the prospect of the Fed raising the fed funds rate sooner than expected
    • 2-yr note yield fell five basis points to 0.50%
    • 10-yr note dropped seven basis points to 2.32%
    • 30-yr bond dipped five basis points to 3.05%
  • Some weakness in the dollar also spoke to the idea that rate hike concerns were mitigated somewhat by the employment data. The U.S. Dollar Index dropped 0.4% to 87.64.
  • Oil (+$0.82 to $78.73/bbl) and gold (+$27.10 to $1169.70/troy ounce) prices bounced back helped by the decline in the dollar and a bubbling up of geopolitical concerns following reports Russian tanks moved into eastern Ukraine
  • The geopolitical factor also fostered some safe-haven positioning in Treasuries ahead of the weekend
  • A speech from Fed Chair Yellen discussing policy since the onset of the financial crisis did not contain any hawkish hitches; therefore, it didn't disrupt buying efforts that took root soon after the employment report 
The Week Ahead
  • There is no data on Monday. Boston's Rosengren travels to Washington and Lee University (17:10). Treasury will auction $26B 3Y notes. 
  • The U.S. Treasury market is closed on Tuesday in observance of Veterans Day. 
  • Data begins to flow on Wednesday as MBA Mortgage Index (7) and wholesale inventories (10) cross the wires. Treasury will hold a $24B 10Y note reopening. Philly's Plosser gives his economic outlook (3). 
  • Thursday's data includes initial and continuing claims (8:30), JOLTs -- Job Openings (10), and the Treasury Budget (14). Treasury will auction $16B 30Y bonds. Philly's Plosser takes part in a panel on "Monetary Policy After Recovery: What Is the New Normal?" (12:30).
  • Friday's data is the most anticipated of the week as retail sales, import/export prices (8:30), Michigan Sentiment (9:55), and business inventories (10) are due out. STL's Bullard speaks on the U.S. economy and monetary policy (9:10).

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