Key Developments
- The S&P 500 gained 2.5% last week, the best weekly return since the middle of June. Tech led sector gains, rising 4.4%, while Utilities lagged, falling 1.7%.
- The second week in a row of lower Treasury yields helped buoy valuations, especially in mid and large-cap growth styles.
- The ISM Manufacturing PMI was slightly above consensus, but still remained in contraction territory at 47.6. The forward looking ISM New Orders component reported at 46.8, below the prior month of 47.3.
- Labor market data reported throughout the week was mixed; ADP employment job gains were 20,000 below consensus, while Job Openings continued lower, showing a cooling of labor data.
- The nonfarm payrolls report showed 187,000 jobs were added in the month of August, above the 170,000 estimate.
- The unemployment rate rose 0.3 pp to 3.8%, though this was mainly due to a significant increase in the labor force.
- The ISM Services report on Wednesday will be closely watched this week as manufacturing activity continues to show weakness, while the services economy remains in expansion.
This Week’s Economic Data
Chart of the Week
A Leading Indicator for the Unemployment Rate Is Inflecting Sharply Higher
-The spread between the Conference Boards survey for “jobs hard to get” and “jobs that are plentiful” has increased significantly following the latest report.
-When this spread increases near a low it tends to be a sign of labor market softness as the number of jobs that are harder to get rises while the number of jobs that are plentiful decreases as companies cut back on hiring.
-Historically, this has been a strong leading indicator for the unemployment rate.
Global Cross-Asset Performance Summary
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Year to Date
S&P 500 Sector Performance
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