The year has seen a gradual increase in financial stress across the United States, as indicated by four key metrics from Federal Reserve banks. One of these indicators has recently suggested a “moderate” level of stress, while the remaining three have not yet corroborated this shift. Consequently, the overall assessment of these indexes still indicates stress that is average or lower. The pressing question is whether the upward trend observed in these benchmarks will continue in the coming weeks.
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● ADP’s private-sector report suggests robust employment growth in the US for January | MarketWatch
● ISM indicates US services sector expanding at its slowest rate in two years | Bloomberg
● PMI shows US services sector growth slowing to its lowest level in 27 months | Markit
● US Job Creation Index drops slightly below record highs in January | Gallup
● Weather-related disruptions may account for a 2.6% decrease in mortgage applications | CNBC
● Global Composite PMI growth hits a 13-month low in January | Markit
● Troubling loans worldwide impact global economic growth | NY Times
● Florida issues public health emergency concerning Zika in four counties | CBS
According to the ADP Employment Report, US companies added 205,000 jobs last month. This growth is notably lower than the revised figure of 267,000 for December. While the recent statistics highlight that the labor market is still expanding at a reasonable pace, it’s evident that the growth rate is slowing down, as indicated by the latest decrease in the annual growth rate.
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US Treasury yields have been declining, challenging the idea that the Federal Reserve will raise interest rates this year. However, if upcoming economic data exceeds expectations, this perception might shift dramatically. This week’s highlight includes the January payroll numbers, starting with the preliminary estimates from ADP, followed by the final figures from the US Labor Department later this week. Meanwhile, Mr. Market has been reducing rates across the Treasury curve amidst rising concerns about economic growth.
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● US auto sales in January have decreased but exceeded expectations | Reuters
● Economic confidence in the US remains static for January | Gallup
● Redbook reports a 1.2% increase in US retail spending for January compared to last year | Fidelity
● Eurozone Composite PMI indicates a slowdown in growth to a four-month low in January | Markit
● Retail sales in the Eurozone rise for the first time in four months | MarketWatch
● China’s service sector experiences its most significant expansion in six months | RTT
For January, private nonfarm payrolls in the US are projected to have increased by 231,000 (seasonally adjusted) from the prior month, according to an average point forecast compiled by The Capital Spectator from several econometric estimates. This marks a moderate decrease compared to the rise observed in December.
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The anticipated risk premium for the Global Market Index (GMI) remained modest in January. GMI—an unmanaged, market-value-weighted mix of the major asset classes—is forecasted to yield a long-term annualized return of 2.9% above the “risk-free” rate. This updated estimate aligns with the previous month’s projections, based on data from January.
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● US personal income is on the rise, but spending remains stagnant in December | 24/7 Wall St
● ISM reports US manufacturing contracting for the fourth consecutive month in January | MarketWatch
● PMI indicates modest growth in US manufacturing picks up in January | Markit
● A slight rise in US construction spending was noted in December | RTT
● Gallup indicates a decline in US consumer spending for January | Gallup
● Global manufacturing growth is weak in January but shows signs of rising | Markit
● Eurozone unemployment decreases in December, although factory prices decline as well | Reuters
● Republican Cruz wins over Trump in Iowa primary, while Clinton narrowly succeeds over Sanders | Reuters
The prevailing risk-off sentiment continued to affect major asset classes in January. The one notable exception was high-quality bonds, which saw a rise in performance, highlighted by a total return of 1.5% for inflation-indexed US Treasuries. Overall, performance data for the opening month of 2016 predominantly trended downward.
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● US GDP growth slowed in the fourth quarter | MarketWatch
● Consumer confidence in the US dipped in January | Bloomberg
● Chicago PMI showed a sharp increase in January | MarketWatch
● PMI highlights that China’s manufacturing sector contracted more than predicted in January | Reuters
● Eurozone factory growth slowed as 2016 began, according to PMI | Reuters
● Oil prices drop by 2% influenced by data from China, diminishing expectations for OPEC action | Reuters
In summary, the economic landscape in the US is marked by a mix of growth indicators and emerging challenges. While job creation shows a healthy yet slowing trend, other areas, including consumer confidence and manufacturing, reveal signs of contraction. Monitoring these developments will be crucial for understanding the broader economic implications in the weeks ahead. Balancing optimism with caution may help navigate the uncertainties ahead.