There was consolidation in the 10-year treasury, as we saw fears of spikes in coronavirus cases appeared in several states that have re-opened. We expect to see more consolidation next week unless we see a sizeable change in the economic landscape, in either a form of vaccine or therapeutic, or if there is a material spike in coronavirus cases. The trading range we continue to see is between 0.54% and 0.78%.
Initial Jobless Claims
Initial Jobless Claims for the week ending June 13th declined -58k to 1.508mln vs. expectations of a drop to 1.29mln. Looking back over the last 13-week period, we have now seen 45.738mln new claims for unemployment benefits. The count this week is down 5.325mln from the peak of 6.867mln during the week of March 28th, however the -58k drop is the smallest decline since that peak. Continuing claims, which lag by a week, fell by -62k to 20.544mln. An interesting point within the data was that there were 37 states that saw their claims numbers decline, while the other 13 saw an increase. Of those 13 states still showing a rise in filings for unemployment, California was at +322k, which accounts for more than 50% of the total.
Retail Sales for May saw a huge rebound this morning as sales rose by +17.7% vs. the decline of -14.7% back in April. Building material sales rose +11%, gasoline sales rose +13%, and autos and parts sales increased up +44%. If we look at the core measure/control group, which excludes those categories, sales still rose by +11% vs. the -12.4% decline in April. In other categories, we see food services rising +29.1%, apparel sales up +188%, furniture store sales up +89.7%, and electronics up +50.5%. Looking ahead, it’s clear that re-openings had their positive effects on May’s data, however, it’s expected that these gains are unlikely to hold as stimulus checks have started to taper off and thus spending by the consumer will drop.
Philly Fed Index
The Philly Fed report on manufacturing in the region rose to +27.5, which was a +70.6 point increase from the prior -43.1, and also now the largest gain on record. Driving the headline increase was a +42 point jump in the new orders index. This report now joins the New York Fed’s report from earlier this week with both beating market expectations by a decent amount.
Housing Starts for May rose +4.3% to a 974k annualized rate, while building permits were up +14.4% to 1.22mln. Both are still well weaker looking year over year, with growth of -23.2% and -8.8%, respectively. Within the data, single-family starts were up +.1% to a 675k unit rate, while multi-family starts jumped +15% to a 299k unit pace. Starts in the West were up +21.5%, +12.8% in the Northeast, while the South declined -16%, and -1.5% in the Midwest. On the permits side, single-family permits increased by +11.9% to a rate of 745k units, while multi-family permits rose +18.8% to a 475k unit rate. Overall, most of the positive data in the report came from the multi-family sector, with new construction mostly in apartment buildings and condos. With interest rates staying low, it's expected that the housing market will in fact help the economy recover at a quicker pace. However, with uncertainty around unemployment rates and the struggle to find a vaccine for the virus, the question that does carry some weight is just how long the housing market can sustain at a higher/better pace.