Mid-Market Update: Stock market rally is what is, poor labor data, Treasury’s record issuance, oil rises, Gold mania continues

Another bullish day for US stocks was driven by strong earnings, another vaccine deal, optimism Capitol Hill will wrap up stimulus talks by the end of the week and despite a couple (ADP & ISM) bad labor reports.  Risk appetite is also unfazed as Wall Street starts to recognize it is becoming more likely November could deliver a Biden presidency. 

Earnings continue to come in at a fast clip and mostly mixed, but the bigger names seem to have impressed.  CVS delivered strong earnings and raised their full-year adjusted earnings forecast.   Last night, Disney was able to squeeze out a profit despite theme parks delivering a near $2 billion loss.  Disney continues to see their streaming service see strong subscriber numbers, 57.5 million, albeit lower than the consensus estimate of 58.4 million.  Disney is comfortable to also test out a strategy with the release of Mulan for about $30 in early September. 


Johnson & Johnson reached a pact with the US government to provide 100 million doses of their experimental coronavirus vaccine.  The US government now has vaccine bets spread across J&J, Moderna, and Pfizer. 

Stimulus Talks

Capitol Hill seems to be making progress with negotiations over the virus stimulus bill.  Lawmakers have agreed upon a deadline for a deal.  They still have a long way to go, but at least offers are being put on the table. 

ADP/ISM Services

Both the ADP private payroll report and ISM Services employment index paint a bad picture for the labor market.  ADP showed hiring stalled in July, only creating 160,000 jobs, much lower than the market forecast of 1.2 million.  The ISM services report was mixed, as activity improved but the employment index declined.  The upturn in activity is not creating jobs and this could spell trouble for Friday’s nonfarm payroll report.


President Trump spoke earlier on Fox News and reiterated ‘big jobs number coming on Friday’.  In June 2018, President Trump implied he knew NFP was going to beat expectations when he tweeted he was looking forward to the employment numbers.  Trump is betting his re-election that the economy will bounce back stronger with him than with Biden.  If ADP and ISM have anything to say about Friday’s numbers, investors may expect a softer reading than the consensus estimate of 1.5 million jobs created. 

President Trump’s re-election chances are starting to look grim.  The President is still struggling in delivering a strategy against the coronavirus.  The US death toll is now over 156,000 and we are still seeing a 1,000 Americans a day dying.  In an Axios interview, Trump said the virus was “under control” and that the death toll “is what it is”.  The uncertainty of the virus in the Fall and how President Trump will try to handle it will start to weigh heavily on labor market.  The stimulus trade remains intact and while we won’t see a massive correction in global equities, the recovery will not be balanced and large parts of the economy will struggle. 


Treasury yields are climbing higher after the Treasury quarterly refunding plans announced a record $112 billion, higher than the market forecast of $108 billion, and significantly higher than the prior quarter’s $96 billion.  Everyone is running towards long-dated bonds as investors seem to believe the Fed is not raising rates for many years, possibly not until after the 2028 Presidential election.   

Stick a fork in the US dollar.  The dollar resumed its slide after the Treasury announced record US bond issuance that saw larger increases in sale sized for longer treasuries.  The euro may have a price barrier at 1.19, but that might not last much longer.  


Crude prices kept their gains after the EIA report posted a much larger-than-expected draw, which was similar to the yesterday’s API release.  Nothing really to get excited about the EIA report, national crude production declined by 100,000 bpd, gasoline inventories rose half a million barrels, and crude imports from Saudi Arabia fell to their second lowest level on record.

The crude supply fundamentals seem fairly in check, so oil prices will likely continue to follow the move in stocks.  This month, OPEC+ began relaxing their record production cuts this month, but the cheaters are expected to make up their shortcomings from earlier in the year.  Also, higher demand in the Persian Gulf will likely absorb a lot of the production that comes back online. 

WTI crude is starting to break away from its tight trading range, but that will not continue if the US economic recover falters and the job creation flatlines. WTI crude’s bullish momentum should fizzle ahead of the $45 level and until after Friday’s non-farm payroll report.   


The gold trade just went from ridiculous to ludicrous speed.  The Treasury quarterly record bond issuance put an exclamation point on the belief the Fed will not raise rates for several years and that they will do more before the year ends.  Gold is about to benefit from another wave of inflows from the fixed income market.  The search for yield is likely to see many investors just continue to add to their gold holdings.


Cryptocurrencies are benefiting from the dollar’s freefall.  Bitcoin and Ether will continue to thrive as real yields continue to make fresh record lows, forcing institutional investors look everywhere outside the fixed income space for opportunities.  Emerging markets still look risky and Bitcoin and other digital coins are seeing strong waves of new interest. 

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Ed Moya

Ed Moya

Senior Market Analyst, The Americas at OANDA
With more than 20 years’ trading experience, Ed Moya is a senior market analyst with OANDA, producing up-to-the-minute intermarket analysis, coverage of geopolitical events, central bank policies and market reaction to corporate news. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Most recently he worked with TradeTheNews.com, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business and Sky TV. His views are trusted by the world’s most renowned global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Breitbart, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.
Ed Moya