Services PMI surprises to downside

Key Concepts:

• S&P PMI Service and Composite
• Downgrade of PMI figures
• ADP Jobs Number
• Interest Rate Volatility
• 418 Tenure (Likely a typo, should be 4.18% on the 10-year Treasury)
• JOLTS (Job Openings and Labor Turnover Survey)
• CPI (Consumer Price Index)
• PPI (Producer Price Index)

S&P PMI Service and Composite Downgrade:

The initial August S&P PMI service and composite figures have been downgraded. The service PMI was initially reported at 55.4 but has been revised down to 54.5. This downgrade moves it from the second strongest number to just under the June figure of 53. The composite PMI also saw a downward revision, moving from 55.4 to 54.6. Both are now the weakest since June.

Market Reaction to PMI Downgrade:

The initial market reaction to the downgraded PMI figures was a slight buying pressure, pushing interest rate yields down. However, this effect has leveled off.

ADP Jobs Number and Interest Rate Volatility:

The ADP jobs number, released earlier in the morning, came in "a little bit light," causing a low spike in interest rates. This contributed to the overall volatility in the market.

Impact of JOLTS Data:

The JOLTS data released yesterday had a significant impact, changing the market landscape. The weak JOLTS data turned what was previously a seller's market (pushing rates up) into a market of covering, as investors anticipated tomorrow's job report and next week's CPI and PPI data.

Current Interest Rate Environment:

The 10-year Treasury yield is currently at 4.18%, down four basis points.

Upcoming Economic Data:

The speaker emphasizes the importance of tomorrow's job report and next week's CPI and PPI data, suggesting they will be crucial in determining the future direction of interest rates and the overall economy.

Notable Quotes:

• "Yes, these are August finals on the S&P PMI service and composite. And we're losing some ground here." - Rick Santelli, highlighting the downgrade of the PMI figures.
• "...the weakest just since June. But it really is a downgrade." - Rick Santelli, emphasizing the significance of the PMI revisions.

Synthesis/Conclusion:

The downgraded PMI figures, coupled with the slightly weaker ADP jobs number and the impact of the previous day's JOLTS data, have created a volatile interest rate environment. The market is now anticipating upcoming economic data releases, particularly the job report, CPI, and PPI, which will likely provide further clarity on the state of the economy and the future path of monetary policy. The initial positive reaction to the PMI downgrade was short-lived, indicating underlying concerns about the strength of the economy.