Tough Treasury Auctions Belie Renewed Recession Chatter

US stock prices and bond yields rose today following the release of the latest weekly jobless claims report confirming our view that the labor market is still doing well. The S&P 500 jumped 2.3% to 5,319.31 and the 10-year Treasury yield briefly rose above 4.00%. The recent lift in the bond yield was exacerbated by the second straight day of weak Treasury auctions. Let's discuss:

(1) Unemployment claims. Initial unemployment claims fell 16,000 to 233,000 (sa, including revisions) for the week ended August 3 (chart). We chalked up much of the weakness in the previous claims report, and Friday's monthly jobs report, to weather and seasonal factors.

During the week ended July 27, continuing unemployment claims in Texas fell -14,499 (nsa), recovering from the impact of Hurricane Beryl. Michigan's continuing claims fell by 11,132 (nsa) as auto assembly plants start to ramp up production after shutting down for retooling. National continuing claims shed 2,000 (nsa, including revisions) for the week ended July 27. We think there's more room for national continuing unemployment claims to fall as weather and seasonal factors fade (chart).