Morning Report: Disappointing ADP print

Vital Statistics:

 

Last Change
S&P futures 2883 13.25
Eurostoxx index 384.71 1.04
Oil (WTI) 62.04 0.65
10 year government bond yield 2.51%
30 year fixed rate mortgage 4.17%

 

Stocks are higher this morning on no real news. Bonds and MBS are up.

 

ADP reported that the private sector created 129,000 jobs in March. Education and health reported the biggest increase, while the financial sector and the construction sector cut jobs. The Street is looking for 170,000 new jobs in Friday’s employment situation report. The Street will look at the payroll number, but the more important one is the average hourly earnings number. The Street is forecasting a 0.3% MOM and 3.4% YOY gain.

 

Construction spending rose 1% in January, and is up 1% on an annual basis. Residential construction rose 1% on a MOM basis, but is down 3.6% YOY. Construction spending was probably affected at least somewhat by the partial government shutdown at the end of last year / beginning of this year.

 

The manufacturing sector continues to do well, with the ISM Manufacturing Index hitting 55.3 in March. New Orders, Production, and Employment were the drivers of the increase. I found this comment interesting: “Business remains very strong amid rumors of a slowdown, but forecasts do not indicate this. Electronics are at tight capacity from manufacturers, with no [change] in the near future.” (Transportation Equipment) The transportation sector touches most parts of the economy, so it has always been the equivalent of the canary in a coal mine. But overall, this report isn’t showing any signs of economic weakness.

 

Durable Goods orders however did show some weakness. Durable Goods orders fell 1.6% in February, however they were up slightly when you strip out the volatile transportation sector. Core Capital Goods (a proxy for business capital expenditures) fell slightly. January’s numbers were revised upward, so the report isn’t as bad as it initially appears.

 

Ron Wyden wants your unrealized capital gains to be taxed every year. This is more or less an Overton Window widening exercise and has a less than zero percent chance of gaining mainstream Democratic support, let alone Republican support. He would also increase the capital gains tax to 37%. It would be like the government assessing you every year on the increase Zillow reports for your home and sending you a bill for 37% of it. The final plan will probably exempt your primary residence, but still – it would force you to sell investments you may not want to sell in order to pay the tax.

 

Further, in the political space, Elizabeth Warren is taking a victory lap after Wells Fargo CEO Tim Sloan’s retirement. She is pushing for laws to make it easier for the government to prosecute corporate executives who don’t have firsthand knowledge of crimes their subordinates are doing.

 

That was quick: After a big open on Friday, Lyft is now trading below its IPO price. The big gains seem to be reaped pre-IPO anymore, when the company is revalued at each funding round. By the time it hits the IPO phase, it is priced for perfection. Remember, Blue Apron, which went public at $10 a share during the summer of 2017? It is now a drill bit.

16 Responses

  1. I think it is in this clip where from the 20 sec mark to the 24 sec mark he says someone’s gonna leak this whole damn speech to the media.

    On C-Span.

    Strange fellow.

    Like

  2. Worth noting:

    “A Predictable Coda to the Waco Biker Gunfight

    Local authorities behaved badly from the start. Anyone could see that.
    Conor Friedersdorf

    Almost four years after a gunfight among rival motorcycle gangs left nine bikers dead at a Twin Peaks restaurant in Waco, Texas, this story of wild misconduct and ineptitude in the criminal-justice system came to a predictable conclusion on Tuesday.

    Roughly 200 bikers were arrested on May 17, 2015, according to the Waco Tribune-Herald; 155 were charged with engaging in organized criminal activity; many were held on $1 million bond. But prosecutors announced yesterday that they were dismissing all remaining cases. In the end, just one biker was brought to trial.

    He was not convicted.

    The former district attorney for McLennan County, Abel Reyna, bears much of the blame. The official narrative laid responsibility for the massacre wholly on the bikers, but the Associated Press later found that police at the scene shot at least four of the nine who died.”

    https://www.theatlantic.com/ideas/archive/2019/04/waco-biker-gunfight-conclusion/586381/

    Like

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