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Daily Market Commentary

ADP employment numbers are out as a preview to Friday's real employment data.  The number hit close to consensus, and there hasn't been a lot of market reaction to it.  This number is still catching on as an employment metric, and because it's released so close to the non-farm payrolls numbers, less attention is paid to it.


  On a more macro theme, we are still curious about the disconnect between corporate spreads and equity markets.  Logically, the two should be inversely related.  As the health of companies goes up, their yield spread drops and their equity price rises.  Same can be said for the risk appetite of investors.  This time around corporate spreads, which moved as expected opposite the equity indexes as they corrected through August, have remained at their relatively wide state, despite the equities moving right back to where they were before the correction.  One of these markets is wrong.  Either corp spreads are destined to narrow, in which case we should be buying corp bonds, or the equities are due to re-correct.  One possible explanation for this disconnect is the large amount of corporate issuance lately which could have pushed out spreads, but the quantity has not been large to the extent that we should be seeing the spreads.  Simply put the bond market is more nervous than the stock market.


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