A day ahead of the all-important Personal Consumption Expenditure (PCE) report, which is the Fed’s preferred gauge for inflation, we still see some key data that may help markets find direction — or, put more plainly, to help market participants see some light at the end of the present tunnel. Since recent market highs mid-month, the Dow is -4%, the S&P 500 is -5%, the Nasdaq -6% and the small-cap Russell 2000 is -4.6%.
Initial Jobless Claims continued to come in lower than expected — even with analysts adjusting for lower trends since the 250K we saw the first week of August — with a headline of 204K for last week. This is 10K fewer than expected, but 2000 more than the previous week’s slightly upwardly revised 202K. The last time we were sub-200K new jobless claims was at the end of January, when Retail and Warehouse jobs tend to distort the overall employment situation.
Continuing Claims ramped slightly higher week over week: 1.670 million, up from a downwardly revised 1.658 million the previous week. These are extraordinarily healthy jobless claims figures — not only because they are below 1.7 million, but because they are so far below 2.0 million. We haven’t been at that level in well over a year, when we were still ramping down from the gigantic spike in jobless claims during the Covid pandemic. Even during a relatively strong economy in the 20-teens we had longer-term claims at or near 2 million week by week, and no one’s hair caught on fire.
Q2 Gross Domestic Product (GDP) ushered in its second and final revision this morning, holding at 2.1% (up from 2.0% in the original print, but below the 2.2% expected this time around) and a modest increase from 2.0% in Q1. The revision to Consumption was something to see, however: from +1.7% reported in the first revision to +0.8% in this final read. This is the lightest Consumption number since the heart of the pandemic, Q2 2020. The Price Index slid from +2.0% last time to +1.7% in this take.
The full PCE report is out tomorrow, and expectations there for year-over-year on core are to come in below 4% for the first time since inflation took off, ahead of the Fed’s ratcheting up interest rate levels. After today’s open, Pending Home Sales for August are expected to post a negative -1.0% from +0.9% the previous month. Both New Home Sales and the Case-Shiller report this week put up numbers below consensus; we wouldn’t be surprised to see the same thing here.
Meanwhile, pre-market futures went from popping in the green on these economic report releases to sliding back into the red: the Dow has gone from +96 points when I first started writing this column to -11 points now, the S&P went from +5 to -3.75 and the Nasdaq moved from +34 points to -32 points presently. Market activity is likely to be relatively tepid ahead of tomorrow’s PCE report. It will also be the final trading day of September — a month we’ll all be happy to exit.
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