Baker Market Update
2023-09-08

Labor Day has now come and gone, and the “unofficial” end of summer is now officially in the rearview mirror. The short trading week proved to be mild as yields across the Treasury curve remained relatively flat. This week was light for economic news and didn’t offer much evidence for traders to change the current belief that the Fed could be nearing the end of their tightening cycle.

Factory Orders fell for the first time since February and were down by -2.1% for the month of July with much of that decline being attributed to transportation. Mortgage Applications for the week declined -2.9% after last week’s positive bounce ended a streak of declining applications that go back to the early part of July. It will be interesting to watch that trend as the seasonality of the fall and winter months typically slow home buying activity.

Applications for unemployment benefits fell to the lowest level since February as Initial Jobless Claims dropped to 216,000 last week. Given the backdrop of last week’s employment numbers, this data suggests that there is still some tightness in the labor market even as conditions show signs of cooling. The Fed is expected to remain steady at the next meeting on September 20th but will want to see continued signs of a softer labor market to guide future policy decisions.

Next week’s economic calendar should provide significantly more information for markets to digest before the Fed’s next meeting. Some of the more closely watched updates will be the CPI and PPI reports released by the US Bureau of Labor Statistics. Fed watchers will be looking for continued moderation in inflation numbers. Additionally, markets will get an opportunity to evaluate Retail Sales numbers for the month of August along with the University of Michigan’s Consumer Sentiment report.