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Jobless Claims, Philly Fed, U.S. Deficit All Shrink

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This morning, pre-market futures are down sizably again, continuing the drop we saw as of the Fed’s decision not to raise interest rates yesterday afternoon. Mixed economic data ahead of the opening bell today has done nothing to quell the sell-off; shares are down on the major indices between -2% (Dow) and -5% (Nasdaq) over the last five trading days. Through the first three weeks of September, the month is living up to its reputation as a bull-market killer.

Initial Jobless Claims for last week fell well below estimates yet again this morning: 201K versus 225K expected — by far the lowest print of this past 12-week cycle, and the lowest amount of new claims going back all the way to the February of this year. It’s also -20K initial claims lower than the previous week, the biggest single-week drop since January. Suffice it to say the neither the Hollywood nor the UAW strikes are generating new jobless claims as yet.

Continuing Claims came in at 1.66 million, also well below expectations and -21K lower week over week. It’s the seventh week in the past nine below 1.7 million longer-term claims, which is an even more robust reflection of our current labor market than initial claims. Literally no one thought U.S. employment would be in this good of shape after a year and a half of near-constant interest rate increases from the Fed, yet here we are. Few people are losing their jobs, and those who do are unlikely to be out of work for long.

The Philly Fed manufacturing survey for September dragged back into negative territory, now for 11 out of the past 12 months. A headline of -13.5 is lower than the 0.0 expected, and obviously below the +12 posted for August. We’ve come down considerably in Philadelphia productivity since the Great Reopening in 2021, and today’s print is the worst since April. This illustrates something of a disconnect — however anecdotal — between a robust workforce nationwide and manufacturing challenges in the 6th largest city in the U.S.

The U.S. Account Deficit improved to -$212.1 billion for Q2 2023, more than $2 billion less than we saw in a downwardly revised Q1, and a far cry (thankfully) from the -283.9 billion we were registering back in Q1 of 2022. The first time we had dipped below -$100 billion on the Deficit was back in the mid-2000s, and only brought back when the Great Recession required shoring up of federal funds. The second time we broke through that floor was when the Covid pandemic emerged, and even though we are off the all-time lows, we’re still deep in the sea.

In documenting the Fed’s decision yesterday to keep interest rates steady at 5.25-5.50% until at least the next Fed meeting in November, we failed to mention FedEx (FDX - Free Report) posting a notable earnings beat in its fiscal Q1 earnings report yesterday afternoon: $4.55 per share swept past the $3.70 expected in the Zacks consensus, for a +23% quarterly beat. Revenues, however, were slightly below estimates to $21.68 billion, though full-year earnings guidance ratcheted up to a range of $17.00-18.50 per share; the Zacks consensus had been $17.38. For more on FDX’s earnings, click here.

After today’s open, we’ll see new Leading Economic Indicators for August (expected -0.5%) and Existing Home Sales (4.1 million expected — which would be only the third month-over-month increase in the past year), neither of which is expected to move the needle on today’s trading sentiment. We’re also seeing very high bond yields: nearly 5.2% on 2’s and close to 4.7% on 10’s. The inverted yield curve gap has shrunk a bit, but at very high levels, which could pose a big challenge to equity investments.

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