Friday Macros....
: Powell Summoned To White House Yesterday... Non Farms Whisper 500+
We expect another day of volatility in rates given the positions going into another critical payroll day... But first, we read a WSJ story that Powell was at the White House yesterday... That tells us that Powell is still in the running to be reappointed ...Add in the strong support from Yellen that CNNC reported on in the beginning of the week, and it is looking good...It seems that Biden is waiting to make a slew of appointments all at once...Clarida will be gone and Quarles is no longer the head regulator...this is a positive if Powell is reappointed as it removes an uncertainty... We do not support his transitory inflation view, but nonetheless we think he has done a good job.
Today... Unemployment... Expectation 450,000... Whisper over 500,000... There are three scenarios... A Very strong number... Expected number ...Weaker number... The problem is that unless the number is out of the park, maybe 750,000 or over a million, we think given the positioning from fast money, we end up bull steepening... But here are the scenarios
Strong number... And we mean strong.... 750 or more... Some back up in rates, but unless it is a game changer of 1mm or more, we see the bull steepening continuing...tapering remains on the path announced... 10 year backs up to 1.60, but we don't see 1.70 until the midweek holiday next week..
Expected number..400-600... Trend of bull steepening continues... 5 year is back to yesterday's resistance of 1... 1.04 is in the picture for today.. Longer term .92 is an exhaustion objective... 10 years 1.48 and then 1.43
Weak Number... Say under 250,000... Heck, given the changing seasonal's and the sophisticated abacus used by the labor department, the number could be negative. Then .92 on 5 years would be a reach, but the curve would steepen as fed watchers would build out 1 full rate hike for 2022...10 year 1.43 and 1.38 but the economy is strong like bull, so fade it if it gets there.
Overnight the S+P futures shot up 20 points from 4 am 7 am... The equity melt up continues, although it seems to be more concentrated and slowing some... We have read that supply chain issues are slowing.. GM said they are now getting chips...Qualcom said they are using multiple suppliers... While that may be true, we think the supply chain issues will be with us through next year.. China's electricity shortage and their ability to build nuclear power plants won't be done overnight... So we remain skeptical and still believe inflation is a problem for 2022...
Should be a wild ride... Our long-term trading says fade the first move...
