* S&P 500, Nasdaq gain; Dow slightly lower
* Real estate leads major S&P sector gainers; energy weakest
* Euro STOXX 600 index up ~0.5%
* Dollar, crude decline, gold slips; bitcoin rises
* US 10-Year Treasury yield ~1.31%
Sept 1 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
ISM, ADP, ET AL: EVERY SILVER LINING HAS A CLOUD (1121
EDT/1521 GMT)
The first month of fall and the last month of the third
quarter were heralded with the release of a data cornucopia,
which contained tastes ranging from sweet to sour.
Starting with the good news, factory activity surprised by
expanding at an ever-so-slightly accelerated pace last month due
to an uptick in new orders.
While analysts expected a nominal loss of momentum, the
Institute for Supply Management's (ISM) purchasing managers'
index (PMI) gained a miniscule 0.4 points to 59.9.
A PMI number higher than 50 signifies activity accelerated
from the previous month.
U.S. factories fared well when social distancing
restrictions caused a demand shift away from customer-facing
services in favor of goods. However, economic reopenings have
sent that pendulum swinging the other way, even as hobbled
supply chains squeeze input prices.
But ISM's August report shows prices paid easing to an
eight-month low, even if the ongoing labor shortage once again
pulled the employment component into contraction territory.
While demand remained strong, supply and labor constraints
remain overhangs.
"Business Survey Committee panelists reported that their
companies and suppliers continue to struggle at unprecedented
levels to meet increasing demand," writes Timothy Fiore, chair
of ISM's Manufacturing Business Survey Committee.
"The new surges of COVID-19 are adding to pandemic-related
issues — worker absenteeism, short-term shutdowns due to parts
shortages, difficulties in filling open positions and overseas
supply chain problems — that continue to limit
manufacturing-growth potential," Fiore adds.
These sentiments were echoed by the survey's participants,
who tossed around phrases like "supplier parts and manpower
challenges" and "lack of workers" and "persistent supply
issues."
Global financial information firm IHS Markit also released
its final take on August manufacturing PMI,
delivering a cheerier reading of 61.1. Markit and ISM PMIs
differ in the weight they apply to the indexes' various
subcomponents.
But ADP delivered the day's bitterest pill.
Private employers added 374,000 jobs in August according to
payrolls processor ADP, undershooting consensus by a mile.
ADP's National Employment Index (NEI) August
number falls 326,000 short of the 700,000 gain in private
payrolls analysts expect the Labor Department's more
comprehensive employment report to show on Friday.
And while ADP and the Labor Department use vastly different
methodologies to arrive at their numbers, some analysts believe
the data is indicative of a broad cool-down in labor market
recovery amid a persistent worker drought and nagging concerns
over the highly contagious COVID Delta variant.
"The Delta Covid wave likely is to blame; the hit to
consumers' spending on discretionary services is clearly visible
in the near-real-time data," writes Ian Shepherdson, chief
economist at Pantheon Macroeconomics. "We expect a further Delta
hit in September, though we hope it will be offset, at least
partly, by the effects of school reopening and the ending of
enhanced unemployment benefits."
Expenditures on construction projects increased
by 0.3% in July, eking out a 10-basis-point upside surprise.
As expected, the Commerce Department's report showed
increased spending on residential projects as the supply of
homes continues its ongoing struggle to keep up with demand.
Outlays on residential construction are up a whopping 27%
year-over-year.
While a 1% decline in spending on transportation projects
was unsurprising, the drop was mitigated by a 1.9% increase in
highways/streets, a counterintuitive move in light of
Washington's hefty infrastructure spending package which is
moving ever-closer to President Biden's pen.
Finally, the Mortgage Bankers Association (MBA) tells us
demand for home loans weakened by 2.4% last week.
With the average 30-year fixed contract rate
holding steady at 3.03%, applications for loans to purchase
homes eked out a 0.6% gain, but that was handily
offset by a 3.8% drop in refi applications, which
represent the lion's share of total demand.
"Underlying demand, still-low mortgage rates and a small
increase in the inventory of existing homes are supportive of
home sales," says Nancy Vanden Houten, lead economist at Oxford
Economics." However, supplies are still historically tight, and
that, along with home prices at record levels, will continue to
temper the pace of home sales."
"Homebuying affordability has deteriorated significantly as
home prices have rocketed higher," she adds.
Wall Street has staggered out of September's starting gate,
weaving between red and green.
At last glance, strength in growth is boosting the
Nasdaq to record levels, while some cyclicals are among the
laggards.
(Stephen Culp)
*****
FLYING FANGS GIVE NASDAQ AN EARLY LIFT (1005 EDT/1405 GMT)
The Nasdaq hit a record high out of the gate on Wednesday as
weaker-than-expected private payroll data fueled hopes for
extended support from the U.S. central bank.
The NYSE FANG+TM Index, which finally closed at a
new high on Tuesday, above its prior peak set on February 16 of
this year, is outperforming with a gain of more than 1%. NYFANG
is now on pace to rally nearly 9%, in just 9 trading days.
Utilities and real estate are the best
performing major S&P 500 sectors, while more economically
sensitive groups are on the weak side. The Dow Transports
and small-cap Russell 2000 are also red on the day.
Growth is outperforming value. In fact, the
IGX/IVX ratio is now nearing its all-time high set in September
2020.
Meanwhile, July construction spending and August ISM
Manufacturing PMI both came in above estimates. ISM prices paid
pulled back to their lowest in eight months.
Here is where markets stand in early trade:
(Terence Gabriel)
*****
BENCHMARK 10-YEAR TREASURY YIELDS EN ROUTE FOR 1.90% IN THE
COMING MONTHS - JPM (0940 EDT/1340 GMT)
The U.S. benchmark 10-year Treasury yield is likely to rise
to 1.90% in the coming months after potentially forming a
reversal pattern, but first it needs to break above the key
1.40% level, according to analysts at JPMorgan.
The yield has bounced from a possible double bottom of
1.128% on July 20 and 1.127% on August 4, levels that the bank
said were overbought in Treasuries. Now that this trend has
decelerated JPMorgan is “looking for an eventual release to
higher yields.”
The 1.40% area, which is close to the top end of the
T-Note's recent trading range, needs to be broken in order to
take yields higher still, analysts including Jay Barry and Jason
Hunter said in a report sent late on Tuesday.
“We believe a move through the 1.40% inflection is required
to create a bearish medium-term momentum dynamic, in which
selling pressure has an increased chance of creating more
selling pressure,” they said.
The 10-year yield is around 1.29% on Wednesday.
Several trend-following signal thresholds also sit between
1.45% and 1.60% and a break through support in the mid-1.40%
area would “open the door for a rapid trend to retest” the 1.79%
level, JPMorgan said.
Longer-term support for the 10-year Treasury then resides in
the 1.90% area, “levels we believe the market to attain in the
months ahead,” they said.
(Karen Brettell)
*****
IS TIME FOR A SEPTEMBER MOURN? (0900 EDT/1300 GMT)
The S&P 500 rose for a 7th straight month in August,
which is its longest such streak since a 10-month run of gains
ending in January 2018. The benchmark index advanced 2.9% last
month and is now up 20.4% year-to-date, which has it on track
for its biggest yearly rise since a 28.9% advance in 2019.
That said, the S&P 500 is about to enter its worst month of
the year.
Using Refinitiv data back to 1928, September has been the
worst month, on average, for the S&P 500. It's average change is
a decline of 1%:
Of note, through Tuesday, it has now been 342 calendar days
since the SPX last ended a decline of more than 5% on a closing
basis.
Interestingly enough, that decline developed in the wake of
the S&P 500's September 2, 2020 high, from which it slid 9.6%
into its September 23, 2020 low.
Additionally, from 1928 to 2020, there were 31 Augusts with
a gain of more than 2%. However, in those instances, the S&P
500's average change for the rest of the year was a gain of only
about 0.5%.
Therefore, whether this September lives up to its reputation
or not, the broad-market average may face a struggle from now to
the end of the year.
(Terence Gabriel)
*****
FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300
GMT - CLICK HERE:
(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)