TGIF Reads

  • This day in 1896: The Dow Jones Industrial Average is first published. Its 12 initial members are the great industrial giants of the time: American Cotton Oil, American Sugar, American Tobacco, Chicago Gas, Distilling & Cattle Feeding, General Electric, Laclede Gas, National Lead, North American, Tennessee Coal & Iron, U.S. Leather, and U.S. Rubber. The index’s value that day: 40.94.  Source: Phyllis S. Pierce, ed., The Dow Jones Averages 1885-1980 (DowJones Irwin, Homewood, IL, 1982), introduction, not paginated; and JasonZweig

  • Very odd the move in treasury yields today on the better than expected NFP number.  Maybe "smart money" is telling us the economy is not as strong as believed?  Extremely interesting to watch.  The Treasury market's reaction hasn't been more negative.  The 10-yr note, which was down 18 ticks shortly after the release, is now down just two ticks and yielding 2.62% (down roughly 40 bps since the end of 2013).  We still recommend caution here.  Let the market show you it's hand (direction) before jumping.  The area to watch most closely, though, is the Treasury market.  A continued recovery trade there could trip up the stock market further, because strength at the back end of the curve doesn't mesh with the economic acceleration argument.
  • Notes from Spreecast discussion this morning with Fed whisperer Jon Hilsenrath
    • Better payroll #s = taper to continue
    • Continued better than expected #s = Fed may accelerate taper and finish sooner
    • The closer we get to October and the stronger the #s are, the more intense the debate comes on whether rates will rise sooner rather than later in 2015
    • The Fed has said bond buying will not stop until 4Q and rate hikes in 2015.  He thinks the market is comfortable of rates not moving until welll into 2015 (but not sooner)
    • If we continue to see strong job creation and the unemployment rate dropping faster, then we could see rates increase sooner but it's a big *IF*
    • When questioned on why gold/silver are popping on NFP, he smiles, does a tap dance and says the Fed has stressed we have no inflation
    • Re:  minimum wage and if a raise could help, he says the Fed economists have studied the effects of a raise in the minimum wage and the Fed's view is fairly conventional.  You get decreased incentive for employers to hire but they're bringing home and spending more in the Fed's view.  It has not risen to the level of debate with them.
    • He thinks the more interesting action is on the local front where cities/states ARE making the move.  He doesn't see much being done ahead of national front in Congress with mid term elections coming up.
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