U.S. nonfarm payrolls increased by just 6,000 in July, and the unemployment rate held steady at 5.9%. Personal income/spending was relatively firm at +0.6%/+0.5% respectively, while factory orders plunged 2.4%. These reports put the final craters in the data minefield following weak GDP, ISM, and confidence data this week.
Amid reports that Goldman Sachs slashed its Fed funds target by 0.75%, and rumors of a European central bank press conference on institutional troubles, 2-year yields completed a 40 basis point decline this week below 2.0%. Euro-dollar futures surged to fresh contract highs and along with this flight into the front-end, Fed funds futures priced in 100% odds of a Fed cut by year-end. Stocks shed another 2.5%, while the September bond gained 1-1/2 points to 107-22 and the 2s-30s spread popped 4 basis points to +321 bp.
San Francisco Fed President Parry urged calm, but Wall Street appeared to have other ideas.