The morning after the latest Federal Open Market Committee (FOMC) meeting — where not only did the Fed decide to keep interest rates steady but also signaled rate cuts in 2024, perhaps sooner than previously expected — we get even more good news: Jobless Claims, Import/Export Prices and Retail Sales for November all outperformed expectations ahead of today’s open. But don’t take my word for it — the Dow is currently up +140 points, the S&P 500 is +15 and the Nasdaq +50 points.
Let’s get right to it: Initial Jobless Claims fell to 202K last week, down -19K from the previous week’s slight upward revision and the lightest print since mid-October. Considering analysts have been anticipating a spike in this data for at least a month, back when it appeared we were headed back toward levels of new jobless claims around 250K. Instead, we’re back down to the lower range of the past 12 weeks — a sign that labor continues to perform well.
Continuing Claims have come up in recent weeks, indicating that while employers are less likely to shed workers of late, it has been more difficult lately for those looking for a new job to find one. But even this level — 1.876 million two weeks ago (a week in arrears from initial claims), up slightly from 1.856 million the previous week — is still within range of a healthy labor market. We had been down at 1.665 million back in mid-September, but anything below 2 million remains consistent with decent employment.
Retail Sales for November surprised to the upside: +0.3%, a nice jump from the -0.1% expected and the downwardly revised -0.2% for October. For context, cycle highs were +0.9% back in September, and October’s print was the lowest since back in March. Ex-auto sales, +0.2% is the read, 20 basis points (bps) above the 0.0% expected, while ex-autos and gas was 3x expectations at +0.6%. The Control number — which gets fed into other economic outputs important to the Fed’s decision making — doubled expectations to +0.4%, the best print since July.
Import Prices, also for November, came in at a deficit only half of expectations: -0.4% versus the consensus -0.8%, and an improvement from the revised -0.6% the previous month. Ex-fuel prices, +0.2% reverses the -0.2% anticipated and reported for October. Year over year, -1.4% was much closer to breakeven than the -2.1% expected. Exports month over month came in -0.9%, -5.2% year over year. These are anti-inflationary measures, but also in-line with expectations.
Meanwhile, 10-year bond yields have now plummeted to 3.982% — remember when these were 5%, mere weeks ago? — and the 2-year is down to 4.378%. Forget flipping the inverted yield curve just yet (it had appeared for a week or two this fall that the flip was going to happen around the 5% mark; that now appears very wrong), but lower yields are a sign that bond markets believe the Fed when it suggests three rate cuts — to a range of 4.50-4.75% — are in the cards for next year.
In other words, we appear to be on the other side of the mountain, and market participants are rejoicing. The normally guarded Fed Chair Jerome Powell seems to have breathed a sigh of relief yesterday on behalf of every (non-bear) investor in America, if not the entire world (the ECB kept rates unchanged this morning, as well, and European markets are up). This morning’s economic data bears this out, and a week and a half before Christmas, if not an actual miracle, we’ll take this as a gift.
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Economic Data Supports Fed Positivity
The morning after the latest Federal Open Market Committee (FOMC) meeting — where not only did the Fed decide to keep interest rates steady but also signaled rate cuts in 2024, perhaps sooner than previously expected — we get even more good news: Jobless Claims, Import/Export Prices and Retail Sales for November all outperformed expectations ahead of today’s open. But don’t take my word for it — the Dow is currently up +140 points, the S&P 500 is +15 and the Nasdaq +50 points.
Let’s get right to it: Initial Jobless Claims fell to 202K last week, down -19K from the previous week’s slight upward revision and the lightest print since mid-October. Considering analysts have been anticipating a spike in this data for at least a month, back when it appeared we were headed back toward levels of new jobless claims around 250K. Instead, we’re back down to the lower range of the past 12 weeks — a sign that labor continues to perform well.
Continuing Claims have come up in recent weeks, indicating that while employers are less likely to shed workers of late, it has been more difficult lately for those looking for a new job to find one. But even this level — 1.876 million two weeks ago (a week in arrears from initial claims), up slightly from 1.856 million the previous week — is still within range of a healthy labor market. We had been down at 1.665 million back in mid-September, but anything below 2 million remains consistent with decent employment.
Retail Sales for November surprised to the upside: +0.3%, a nice jump from the -0.1% expected and the downwardly revised -0.2% for October. For context, cycle highs were +0.9% back in September, and October’s print was the lowest since back in March. Ex-auto sales, +0.2% is the read, 20 basis points (bps) above the 0.0% expected, while ex-autos and gas was 3x expectations at +0.6%. The Control number — which gets fed into other economic outputs important to the Fed’s decision making — doubled expectations to +0.4%, the best print since July.
Import Prices, also for November, came in at a deficit only half of expectations: -0.4% versus the consensus -0.8%, and an improvement from the revised -0.6% the previous month. Ex-fuel prices, +0.2% reverses the -0.2% anticipated and reported for October. Year over year, -1.4% was much closer to breakeven than the -2.1% expected. Exports month over month came in -0.9%, -5.2% year over year. These are anti-inflationary measures, but also in-line with expectations.
Meanwhile, 10-year bond yields have now plummeted to 3.982% — remember when these were 5%, mere weeks ago? — and the 2-year is down to 4.378%. Forget flipping the inverted yield curve just yet (it had appeared for a week or two this fall that the flip was going to happen around the 5% mark; that now appears very wrong), but lower yields are a sign that bond markets believe the Fed when it suggests three rate cuts — to a range of 4.50-4.75% — are in the cards for next year.
In other words, we appear to be on the other side of the mountain, and market participants are rejoicing. The normally guarded Fed Chair Jerome Powell seems to have breathed a sigh of relief yesterday on behalf of every (non-bear) investor in America, if not the entire world (the ECB kept rates unchanged this morning, as well, and European markets are up). This morning’s economic data bears this out, and a week and a half before Christmas, if not an actual miracle, we’ll take this as a gift.
Questions or comments about this article and/or author? Click here>>