Today's big economic release was July's Employment report at 8:30 AM ET, giving us little that can be considered good news for rates. It revealed that the U.S. unemployment rate slipped 0.1% to 3.5% last month while a whopping 528,000 new jobs were added to the economy. Forecasts were calling for an unchanged unemployment rate of 3.6% and only 250,000 new payrolls. There were also relatively minor upward revisions to June and May's payrolls.
Average earnings, which bonds are extremely sensitive to, didn't help matters either. Today's report showed a 0.5% rise when they were predicted to rise only 0.3%. The higher wages fuel inflation as workers now have more money to spend and businesses often raise the costs of their goods and services to cover the higher pay.
The surprisingly resilient employment sector is going to allow the Fed to be more aggressive with raising key short-term interest rates to slow the economy and bring inflation down. This is likely the reason for the negative reaction in stocks today. Stronger economic data tends to fuel stock gains, but in this case, the Fed's ability to be aggressive with monetary policy may restrict future corporate earnings. It is important to remember though, the Fed's actions now are going to help bring down mortgage rates in the future.
Next week does not have a high number of economic reports scheduled, but the list includes two highly influential inflation indexes. We also have two Treasury auctions that are likely to affect rates during afternoon trading midweek. Monday has nothing scheduled that we need to be concerned with, meaning we can expect weekend headlines to be the cause if there is a noticeable move in rates to start the week.
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