Market Matters – January 11, 2020 Edition


ISM Non-Manufacturing Index
The ISM Non-Manufacturing Index for December rose by +1.1 points to 55.0 vs. the 53.9 in November and expectations of a 54.5 print. This is now a 4-month high with generally all sectors reporting optimistic outlooks. The business activity index posted the best result, up +5.6 points to 57.2, while new orders were down -2.2 to 54.9 and a 3-month low. In other sectors, employment fell by -.3 to 55.2, while supplier deliveries rose +1 to 52.5.
Middle East Conflict
U.S. equities returned to their record setting weight just a week after a U.S. airstrike killed Iran’s top military commander and set off a string of geopolitical developments that aggravated markets around the globe. Despite the tit-for-tat military actions over the last several days, Iran’s foreign minister said it had “concluded” its response to the U.S. action and President Trump later said America would implement economic sanctions but gave no indication of further military activity.

Although it has had little market impact, the U.K.’s lower house easily passed PM Johnson’s Withdrawal Agreement Bill by a vote of 330 to 231, sending the bill to the House of Lords and paving the way for the U.K. to finally exit the EU at the end of the month. The heavy lifting is far from over, however, as the government must now work on details of the parties’ future relationship before the transition period expires at the end of the year. PM Johnson has said there will be no extension while the EU has indicated it believes it will be nearly impossible to finalize a deal in the eleven months that remain.


The geopolitical events have taken precedent over any economic data this week. We saw a very mixed jobs report, yet not one that is weaker or stronger enough to change any outlook on the Fed with regards to rate changes. The labor market has seen 111 straight months of positive job growth and that doesn’t look to end any time soon. Looking at interest rates, we did see a slight rally at the beginning of the week that rested stronger resistance. However, any flight to quality bid has been held at ~1.70% on the 10yr, so until we see a break below that level, it’s bound to stay choppy and vulnerable to higher yields.


Call today to discuss this week’s market trends.



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