India’s Year over Year GDP Growth slowed down to 5.4%, below expectation of 6.5%

11/29/2024 3:00 pm EST

AJ Economy Trend - Asia Down

India's GDP growth decelerated to 5.4% year-on-year in the July-September quarter of 2024, down from 6.7% in the previous quarter and below market expectations of 6.5%.

Sectoral Performance:

  • Manufacturing: Growth slowed to 2.2% from 7% in the prior quarter, indicating reduced industrial activity.

  • Electricity, Gas, Water Supply, and Other Utility Services: Expansion decreased to 3.3% from 10.4%, reflecting a downturn in utility services.

  • Construction: The sector contracted by 0.1%, a significant decline from the 7.2% growth observed previously.

  • Agriculture, Livestock, Forestry, and Fishing: Growth improved to 3.5% from 2%, suggesting a rebound in the primary sector.

  • Services: The tertiary sector maintained steady growth at 7.1%, comparable to the previous quarter's 7.2%.

Contributing Factors:

  • Private Consumption: Accounting for 60% of GDP, private consumption grew by 6%, down from 7.4% in the previous quarter. This slowdown is attributed to higher food inflation, elevated borrowing costs, and stagnant wage growth, which have dampened urban spending despite a recovery in rural demand.

  • Government Expenditure: Real-term government spending increased by 4.4% year-on-year, recovering from a 0.2% contraction in the prior quarter, indicating a resurgence in public sector investment.

Germany’s number of unemployed individuals reached 2.86 million

11/29/2024 3:00 pm EST

AJ Economy Trend - Europe Down

In November 2024, Germany's unemployment figures presented a mixed picture:

  • Unemployment Figures: The number of unemployed individuals increased by 7,000, reaching a total of 2.86 million. This rise was significantly below the anticipated increase of 20,000, indicating a less severe impact than expected.

  • Unemployment Rate: The seasonally adjusted unemployment rate remained steady at 6.1%, unchanged from October. This stability suggests that, despite economic challenges, the labor market has not deteriorated further in terms of unemployment rate.

  • Job Vacancies: The demand for labor showed signs of weakening, with job openings declining to 668,000—a decrease of 65,000 compared to the same period last year. This reduction reflects a cautious approach by employers amid ongoing economic uncertainties.

These developments occur against a backdrop of economic challenges, including a slowdown in key industries and concerns about future employment prospects. Notably, the manufacturing sector is experiencing increased short-time work and job cuts as it navigates the current economic climate.

Japan’s Consumer Confidence Index increased slightly due to decline in employment sentiment in November 2024

11/29/2024 1:00 pm EST

AJ Economy Trend - Asia Down Mix Due to Decline in Employment Sentiment

Japan's Consumer Confidence Index (CCI) increased to 36.4 in November 2024 from October's 36.2, aligning with market forecasts. This uptick reflects improved household sentiment in several areas:

  • Income growth: rose to 40.2 from 39.4 in October.

  • Willingness to buy durable goods: edged up to 29.9 from 29.7.

  • Overall livelihood: slightly increased to 34.3 from 34.2.

Sentiment regarding employment declined to 41.0 from 41.6. These figures suggest a modest recovery in consumer confidence, with notable gains in income expectations and purchasing intentions, despite concerns about employment prospects.

source: Trading Economics, Cabinet of Japan

Germany’s unemployment rate unchanged at 6.1% compare to previous month

11/29/2024 1:00 pm EST

AJ Economy Trend - Europe Down

As of November 2024, Germany's seasonally adjusted unemployment rate stands at 6.1%, unchanged from the previous month. The number of unemployed individuals increased by 7,000, bringing the total to approximately 2.86 million.

This rise in unemployment is less than the 20,000 increase anticipated by analysts, indicating a slightly more resilient labor market than expected. However, economic challenges persist, with job vacancies declining to 668,000—a decrease of 65,000 compared to the same period last year.

Economists forecast that Germany's economy will underperform among the G7 nations for the second consecutive year, with further increases in unemployment anticipated in 2025. Factors such as a shortage of skilled workers and weak labor productivity are contributing to these challenges. Additionally, companies are exhibiting caution in their hiring plans, as reflected in a slight drop in the Ifo employment barometer.

In the manufacturing sector, some companies are implementing short-time work and job cuts to navigate the current economic downturn. Overall, the labor market is beginning to feel the strain of these economic challenges, which may also negatively impact consumer sentiment.

Core PCE Price Index reported at 2.8% with slowed down increase but still above Fed’s Target

11/27/2024 1:00 pm EST

AJ Economy Trend - US Down

In October 2024, the PCE Price Index increased by 0.2% from the previous month, maintaining the same pace as in September. On a year-over-year basis, the index rose by 2.3%, up from 2.1% in September. The core PCE Price Index, which excludes food and energy, rose by 0.3% month-over-month and 2.8% year-over-year, slightly higher than September's 2.7%.

These figures indicate that while inflation remains above the Federal Reserve's target, the increases are modest. The Fed considers such data when making decisions about interest rates and other monetary policies to achieve its dual mandate of stable prices and maximum employment.

France’s consumer index fell to 90 from 93 in October, reflecting growing concerns on rising unemployment

11/27/2024 10:00 am EST

AJ Economy Trend - Europe Down

In November 2024, France's consumer confidence index fell to 90, down from a revised 93 in October, marking the lowest level in five months. This decline reflects growing concerns among households about rising unemployment and the country's economic outlook.

The index, compiled by the National Institute of Statistics and Economic Studies (INSEE), is based on a survey of approximately 2,000 households, assessing their perspectives on personal financial situations, economic conditions, unemployment, and intentions regarding major purchases and savings. A value above 100 indicates optimism, while below 100 signifies pessimism.

In November, several components of the index deteriorated:

  • Future Financial Situation: The balance of opinion fell to -13 from -8 in October, indicating increased pessimism about personal financial prospects.

  • Unemployment Concerns: The proportion of households fearing a rise in unemployment increased, with the corresponding balance climbing to 42 from 33.

  • Major Purchases: The index measuring the suitability of making major purchases slightly declined to -30 from -29, suggesting reduced consumer spending intentions.

These figures underscore the challenges facing the French economy, as consumer confidence is a key indicator of household spending, which significantly influences economic growth. The decline suggests potential headwinds for domestic demand in the near term.

For more detailed information, refer to INSEE's official publications.

The U.S. economy expanded at an annualized rate of 2.8% in the third quarter of 2024

11/27/2024 11:00 am EST

AJ Economy Trend - US Neutral

The U.S. economy expanded at an annualized rate of 2.8% in the third quarter of 2024, consistent with the advance estimate and slightly below the 3.0% growth observed in the second quarter. This growth was primarily driven by robust consumer spending, which increased by 3.5%, marking the fastest pace since the first quarter of 2023. However, this figure was revised down from the initial estimate of 3.7%. The surge in consumer spending was led by a 5.6% increase in goods consumption, down from the previously reported 6%, while spending on services remained steady at 2.6%.

Government consumption expenditures and gross investment grew by 5%, unchanged from the advance estimate, reflecting continued public sector support to the economy. Net trade contributed negatively to GDP growth, with a slightly larger drag of 0.57 percentage points compared to the initial estimate of 0.56 percentage points. This was due to downward revisions in both exports, which grew by 7.5% (initially 8.9%), and imports, which increased by 10.2% (initially 11.2%).

Private inventory investment subtracted 0.11 percentage points from GDP growth, an improvement from the 0.17 percentage point reduction reported in the advance estimate, indicating a smaller-than-expected drawdown in inventories. Fixed investment rose by 1.7%, exceeding the earlier estimate of 1.3%. Within this category, equipment investment surged by 10.6%, slightly below the initial 11.1% estimate. Conversely, investment in structures declined by 4.7% (initially -4%), and residential investment decreased by 5% (initially -5.1%), highlighting ongoing challenges in the construction and housing sectors.

Chicago Purchasing Manager’s Index down to 41.6 from 46.6 in September

11/27/2024 10:00 am EST

AJ Economy Trend - US Down

The Chicago Purchasing Managers' Index (PMI), also known as the Chicago Business Barometer™, is a key indicator of economic activity in the Chicago region, encompassing both manufacturing and non-manufacturing sectors. Compiled by the Institute for Supply Management-Chicago (ISM-Chicago) and MNI Indicators, the index is derived from five weighted components: Production (25%), New Orders (35%), Order Backlogs (15%), Employment (10%), and Supplier Deliveries (15%). A PMI reading above 50 signifies expansion, while a reading below 50 indicates contraction.

In October 2024, the Chicago PMI declined to 41.6 from 46.6 in September, marking the lowest level since May 2024. This downturn reflects a contraction in the region's economic activity for the 11th consecutive month, with significant decreases in Production, New Orders, Order Backlogs, and Employment.

Source: Chicago Business Barometer

Initial Jobless Claims at 213,000 compared to 215,000 revised number from previous week

11/26/2024 10:00 am EST

AJ Economy Trend - US Down Mix due to rising continuous claims

Initial Unemployment Claims

Latest Data: Seasonally adjusted initial claims for the week ending November 23 were 213,000, a decrease of 2,000 from the previous week's revised level.

Revision Details: The previous week's level was revised up by 2,000 (from 213,000 to 215,000).

4-week Moving Average: It decreased by 1,250 to 217,000, indicating a smoother downward trend.

The previous week's average was revised up by 500 (from 217,750 to 218,250).

Insured Unemployment (Continuing Claims)

Insured Unemployment Rate: Unchanged at 1.3% for the week ending November 16.

Insured Unemployment Numbers: Increased by 9,000 to 1,907,000, marking the highest level since November 13, 2021.

The previous week's figure was revised down by 10,000 (from 1,908,000 to 1,898,000).

4-week Moving Average: Rose by 13,500 to 1,890,250, the highest since November 27, 2021.

The previous week's average was revised down by 2,500 (from 1,879,250 to 1,876,750).

France Manufacturing And Services PMI remained in contraction in October 2024

11/22/2024 10:00 am EST

AJ Economy Trend - Europe Down

In November 2024, France's manufacturing sector experienced a further decline, with the HCOB France Manufacturing PMI dropping to 43.2 from 44.5 in October, indicating a more pronounced contraction than anticipated. This decline marks the 22nd consecutive month of shrinking manufacturing activity, the most severe since January. The downturn was particularly acute in the automotive, construction, and cosmetics industries, where factory orders diminished both domestically and abroad. Despite the faltering demand, there was a notable increase in input prices, contrasting with a decrease in output prices. This imbalance has led to continued workforce reductions within factories. Firms also reported a persistent negative outlook, suggesting ongoing challenges for the sector.

The French services sector experienced a significant contraction in November 2024, with the HCOB France Services PMI dropping to 45.7, down from 49.2 in October and falling below expectations of 49. This marked the most substantial contraction since January, attributed to political and economic uncertainties that curtailed client spending. New orders declined sharply, leading businesses to focus more on clearing backlogs, which in turn resulted in the most pronounced reduction in outstanding business volumes in four years. Despite these challenges, employment in the sector increased, witnessing the strongest hiring rate in six months. Cost pressures also intensified, with input prices reaching a three-month high, causing service providers to raise their output charges. Looking forward, growth expectations have turned pessimistic for the first time since May 2020, driven by enduring weak demand.

HCOB France Services PMI

HCOB France Manufacturing PMI

Germany’s Economy Continued To Contract with -0.3% Contraction

11/21/2024 10:00 am EST

AJ Economy Trend - Europe Down

Germany's economy continued its downward trend with a 0.3% contraction in gross domestic product (GDP) year-on-year for the third quarter of 2024. This contraction matches the decline in the previous quarter and is slightly worse than initial estimates, which forecasted a 0.2% drop. This marks the fifth consecutive quarter that the German economy has contracted, underscoring persistent economic challenges.

S&P Service Sector Index PMI increased to 57 but Manufacturing PMI continues to struggle with contraction at 48.8

11/21/2024 10:00 am EST

AJ Economy Trend - US Down Mix

In November, the U.S. economy accelerated, driven by optimism regarding potential interest rate cuts by the Federal Reserve and favorable policies expected from a pro-business Trump administration. The S&P U.S. service sector index surged to a 32-month high of 57.0, up from 55.0 the previous month, indicating strong growth especially since readings above 55 are considered exceptional. This growth in the service sector, which employs the majority of Americans and includes industries like banking, retail, and restaurants, has been a pivotal force in driving the post-pandemic economic expansion.

Conversely, the manufacturing sector continues to struggle, with the "flash" U.S. manufacturing PMI remaining in contraction at 48.8, showing little change from prior assessments. Manufacturing constitutes a smaller portion of the economy today compared to services.

Key developments in November included a sharp rise in new orders, reaching a two-year high, and a slight cooling in inflation rates. However, employment in the sector fell for the fourth consecutive month, though there are signs of optimism and potential hiring increases in the manufacturing sector, suggesting a more broad-based economic upturn in the near future.

Economic Leading Indicator shows 12 months continuous decline in October 2024

11/21/2024 10:00 am EST

AJ Economy Trend - US Down Mix

In October, the leading indicators for the U.S. economy declined for the eighth consecutive month, decreasing by 0.3% as reported by the Conference Board. This decline was primarily driven by an increase in jobless claims, a reduction in building permits, and a decrease in manufacturing orders. Despite this persistent downward trend in the leading index, which has been occurring almost monthly since early 2022, the overall economy has maintained robust growth.

Initial Jobless Claim decreased 6,000 to 213,000 with revised count of 219,000 from previous week’s claim.

11/21/2024 10:00 am EST

AJ Economy Trend - US Up Mix due to revision

Last week, U.S. jobless claims fell to a seven-month low, reflecting the economy's steady growth and ongoing demand for a full workforce. The latest figures show a decrease of 6,000 applications, with new claims settling at 213,000, down from a revised count of 219,000 the previous week. This decline occurred in 37 out of the 53 states and territories that contribute data.

Despite the drop in new claims, there is a concerning rise in continuing claims, which have now exceeded 1.9 million for the first time since early 2018, excluding the pandemic months. This increase suggests that individuals are finding it more challenging to secure new employment after job loss, pointing to potential underlying issues in the labor market.

October Retail Sales rose 0.4%, beating expectations and September’s figure revised up to 1.2% gain.

11/15/2024 10:00 am EST

AJ Economy Trend - US Up Mix possible personal debt increase with consumption

On Friday, November 15, 2024, the Commerce Department reported that October retail sales increased by 0.4% from September, surpassing economists' expectations of a 0.3% rise. Additionally, September's sales growth was revised upward to 0.8%, doubling the initial estimate. However, when excluding food and gasoline, sales in October rose by just 0.1%, below the anticipated 0.4% increase, though September's figures were also revised up to a 1.2% gain from 0.7%.

Despite these positive retail figures, Federal Reserve Chairman Jerome Powell indicated that policymakers are in "no hurry" to cut interest rates, citing ongoing economic growth, a solid job market, and inflation above the 2% target.

This cautious stance contributed to a decline in the stock market, with the S&P 500 falling 1.3% on Friday, extending its weekly losses.

Initial Jobless Claims down 4,000 from prior week and insured unemployment dropped to 1,873,000

11/15/2024 10:00 am EST

AJ Economy Trend - US Up

In the latest report for the week ending November 9, U.S. initial jobless claims saw a decrease of 4,000, reaching 217,000 from the prior week's level of 221,000, which was not revised. The four-week moving average also fell by 6,250 to 221,000 from the previous average of 227,250, indicating a slight improvement in jobless claims trends.

The insured unemployment rate remained steady at 1.2 percent as of the week ending November 2, with no change from the previous week. The number of people receiving benefits, known as the insured unemployed, dropped by 11,000 to 1,873,000 from the previous week’s revised figure. The previous week's numbers themselves were adjusted downward by 8,000 from 1,892,000 to 1,884,000.

The four-week moving average of the insured unemployed slightly increased by 1,000, reaching 1,874,500, which marks the highest level for this average since November 27, 2021, when it stood at 1,928,000. This revision adjusts the prior week’s average down from 1,875,500 to 1,873,500. This data suggests a mixed outlook with a general stability in the insured unemployment rate but a slight increase in the average number of claims.

Producer Price index at 2.4%, Core PPI at 3.5% in October PPI Report

11/14/2024 10:00 am EST

In October, the Producer Price Index (PPI) for final demand increased by 0.2 percent, marking a continuation of the trend observed over the past few months, with a 0.1 percent rise in September and a 0.2 percent increase in August. Annually, the index rose by 2.4 percent, unadjusted.

The majority of the increase in October was attributed to the services sector, where the PPI for final demand services rose by 0.3 percent. This was mainly driven by a similar 0.3 percent increase in prices for services excluding trade, transportation, and warehousing. Additionally, there was a 0.5 percent increase in transportation and warehousing services and a slight 0.1 percent rise in trade services.

Significant contributors to the rise in service prices included a notable 3.6 percent increase in portfolio management fees. Other areas seeing price increases were machinery and vehicle wholesaling, airline passenger services, computer and software retailing, outpatient care, and cable and satellite services. However, there were declines in apparel retailing and freight trucking, which fell by 3.7 percent and in securities brokerage and investment advice services.

For final demand goods, there was a modest 0.1 percent increase, following two months of decline. This was primarily due to a 0.3 percent rise in the index for goods excluding food and energy. On the contrary, energy prices fell by 0.3 percent and food prices by 0.2 percent.

Significant movements in goods prices included an 8.4 percent jump in carbon steel scrap and increases in meats, diesel fuel, vegetables, and oilseeds. Conversely, liquefied petroleum gas prices plummeted by 18.1 percent, and there were decreases in chicken eggs, processed poultry, and ethanol prices.

Overall, the data for October suggests a mild upward pressure in producer prices, particularly in services excluding more volatile sectors like trade and transportation, with an ongoing modest rise in the core index of final demand less foods, energy, and trade services, which increased by 3.5 percent over the past twelve months.

Consumer Price index at 2.6%, Core CPI at 3.3% in October CPI Report

11/14/2024 09:00 am EST

In October, the Consumer Price Index for All Urban Consumers (CPI-U) saw a 0.2 percent rise, maintaining the same monthly increase pattern observed over the previous three months. Annually, the index escalated by 2.6 percent without seasonal adjustments.

The shelter index was a significant contributor to October's inflation, increasing by 0.4 percent and accounting for more than half of the overall monthly rise in the CPI. Food prices also edged higher, with a 0.2 percent increase; specifically, the index for food consumed at home went up by 0.1 percent, and the index for food consumed away from home rose by 0.2 percent. Energy prices remained steady during the month, following a 1.9 percent decline in September.

Excluding food and energy, the core CPI increased by 0.3 percent, mirroring rises seen in August and September. Notable increases in this category were observed in shelter, used cars and trucks, airline fares, medical care, and recreation, while prices for apparel, communication, and household furnishings and operations dipped.

Looking at the year-over-year metrics, the all items index has gone up by 2.6 percent, an acceleration from the 2.4 percent increase recorded in the preceding year. The core index, excluding food and energy, saw a 3.3 percent rise over the past 12 months. Energy prices showed a significant annual decline of 4.9 percent, whereas food prices modestly increased by 2.1 percent over the same period.

United Kingdom’s unemployment rate increased to 4.3%, surpassing anticipated level of 4.1%

11/11/2024 12:00 pm EST

The United Kingdom's unemployment rate increased to 4.3% between July and September 2024, up from 4% in the previous quarter, surpassing the anticipated 4.1%. This rise marks the highest level since the three months ending in May 2024. The uptick is primarily attributed to an increase in individuals unemployed for up to six months, while those unemployed for over six months also rose during this period.

Despite the rise in unemployment, the number of employed individuals grew by 220,000 to 33.31 million, driven mainly by year-over-year growth in full-time employment. Conversely, the proportion of people holding second jobs declined, now representing 3.7% of all employed individuals. The economic inactivity rate remained steady at 21.8%, unchanged from the previous period.

These figures suggest a complex labor market scenario, with simultaneous increases in employment and unemployment rates. The rise in unemployment, particularly among those unemployed for up to six months, may indicate emerging challenges in the job market.

It's important to note that recent data collection challenges have introduced increased volatility in labor market estimates. The Office for National Statistics advises caution when interpreting short-term changes and recommends considering these figures alongside other labor market indicators for a comprehensive understanding.

Buffet Indicator shows 208% overvalue from the size of the current US economy

11/08/2024 12:00 pm EST

The Buffett Indicator, at its current value of 208%, is a crucial tool for evaluating stock market valuations relative to the size of the US economy. This figure, well above its historical average, signals that the market may be significantly overvalued, posing risks of a potential market correction. The Indicator's emphasis on total market value versus GDP helps highlight when the market's valuation may be disconnected from economic fundamentals.

Key aspects of the Buffett Indicator include:

  1. Comparative Market Valuation: The ratio gives investors an overarching sense of how current stock market valuations measure up against economic productivity, identifying potential bubbles when valuations surge relative to GDP.

  2. Interest Rate Impact: High or low interest rates play a pivotal role in influencing this ratio. Low rates often lead to higher stock prices as investors seek better returns than those offered by bonds, potentially inflating the ratio. Conversely, high rates can suppress stock valuations.

  3. Global Sales Influence: Modern globalization means that US-based companies often derive substantial revenues from international markets. This revenue inflates the stock market value relative to domestic GDP, complicating direct comparisons between the two figures.

  4. Cyclical Behavior and Trends: Historical deviations from the trend, such as those during the dot-com bubble, show that extreme overvaluations can persist before correcting. The current value, at 2.2 standard deviations above the trend, implies a strong likelihood of overvaluation based on historical precedent.

Why It Matters: When the stock market valuation significantly outpaces GDP growth, it can indicate unsustainable conditions fueled by investor optimism, low interest rates, or speculative behavior. Understanding this ratio helps investors, analysts, and policymakers assess whether the market is rationally priced or potentially vulnerable to correction.

Source: https://www.currentmarketvaluation.com/models/buffett-indicator.php

Federal Reserve lowered Fed Fund Rates by 25bps

11/08/2024 12:00 pm EST

On November 7, 2024, the Federal Reserve reduced its benchmark interest rate by 0.25 percentage points, bringing it to a range of 4.5% to 4.75%. This decision follows a larger 0.5 percentage point cut in September, marking the first rate reductions since 2020.

The Federal Reserve's actions aim to support economic growth amid signs of a cooling labor market and inflation nearing the central bank's 2% target. In September, the core personal consumption expenditures (PCE) price index, which excludes food and energy prices, increased by 2.7% from the previous year, slightly above expectations.

Despite these rate cuts, the U.S. economy has shown resilience, with a 2.8% GDP growth in the third quarter and a slight decrease in unemployment to 4.1%.

However, the Federal Reserve remains cautious, indicating that future rate decisions will depend on ongoing economic assessments.

Initial Jobless Claims climbed to 218,000 and continuous unemployment is highest since November 2021

11/07/2024 12:00 pm EST

Initial Unemployment Claims:

  • For the week ending November 2: 221,000 new claims were filed, up by 3,000 from the revised figure of 218,000 from the prior week.

  • 4-week moving average: Decreased by 9,750 to 227,250, suggesting a stabilization or slight decline in the trend.

Insured Unemployment:

  • Insured unemployment rate: Remained at 1.2% for the week ending October 26.

  • Number of people receiving unemployment benefits: Increased to 1,892,000, up by 39,000 from the previous week, marking the highest since November 2021.

  • 4-week moving average for insured unemployment: Increased by 8,500 to 1,875,500, also the highest since late November 2021.

October 2024 US unemployment unchanged at 4.1% but with massive downward revisions of employment from previous months

11/01/2024 12:00 pm EST

The October 2024 U.S. employment report released by the Bureau of Labor Statistics indicates minimal changes in the labor market. Total nonfarm payroll employment showed a negligible increase of 12,000 jobs, maintaining the unemployment rate at 4.1%. This steady state reflects ongoing trends with slight gains in sectors like healthcare and government, contrasted by losses in temporary help services and a notable decline in manufacturing due to strikes. The report also highlights the effects of Hurricanes Helene and Milton, which caused significant disruptions in the southeast U.S., potentially influencing the job market data.

Household survey data reveal consistent unemployment rates across various demographic groups with no significant changes in the number of unemployed, remaining around 7.0 million. Long-term unemployment figures are slightly higher than the previous year, reflecting persistent challenges in the labor market. Labor force participation and employment-population ratios remained stable, indicating little overall movement in workforce engagement.

In industry specifics, health care continued to add jobs, aligning with its year-long growth trend, while government employment also rose. Conversely, the manufacturing sector suffered job losses primarily due to strike actions, impacting overall employment figures in this sector. The report also detailed adjustments in employment data for previous months, showing downward revisions that suggest less growth than initially reported.

The revisions to the total nonfarm payroll employment figures for August and September indicate significant downward adjustments. Originally reported gains for August were decreased from 159,000 to 78,000, and for September from 254,000 to 223,000. These adjustments have resulted in a combined reduction of 112,000 jobs for these two months compared to previous reports. These changes are attributed to additional data received from businesses and government agencies, as well as the recalibration of seasonal factors, which are routine processes in refining employment estimates.

As the economic landscape continues to evolve, these employment figures provide a critical insight into the ongoing recovery and adjustments within the U.S. labor market, signaling cautious watchfulness from policymakers, particularly in anticipation of potential rate adjustments by the Federal Reserve in response to economic conditions.

Initial Jobless Claims at 216,000, lowest level since May 2024

10/31/2024 11:30 am EST

The U.S. Department of Labor reported that initial jobless claims decreased by 12,000 to 216,000 for the week ending October 26, 2024, marking the lowest level since May. This decline suggests a rather resilient labor market, as the number of Americans filing new applications for unemployment benefits fell for the third consecutive week. The four-week moving average of initial claims, which smooths out weekly volatility, decreased by 2,250 to 236,500. This trend indicates a steady labor market, with businesses managing labor costs through reduced hiring rather than layoffs.

Continuing jobless claims, representing the number of people receiving benefits after an initial week of aid, fell by 26,000 to 1.86 million for the week ending October 19. This decrease suggests that those who had been receiving unemployment benefits are finding new employment opportunities.

PCE inflation at smallest year over year increase since 2021 at 2.1% annually

10/31/2024 11:00 am EST

In September, U.S. inflation continued edging closer to the Federal Reserve's 2% target, with the personal consumption expenditures (PCE) price index rising 0.2% monthly and 2.1% annually—the smallest year-over-year increase since early 2021. Core PCE inflation, excluding food and energy, increased by 0.3% monthly, steadying at 2.7% annually. Energy prices dropped 2% in September, aiding in lowering overall inflation, though core inflation remains elevated due to persistent service costs, which rose 3.7% over the year.

Personal income grew by 0.3% in September, with consumer spending up 0.5% and the personal saving rate down to 4.6%. Given these trends, the Fed is likely to announce a 0.25% rate cut in November, following a prior half-point cut in September, though core inflation remains a point of concern for the central bank's policy considerations.

US Q3 2024 GDP 2.8% while personal income and savings dropped from Q2 2024

10/30/2024 10:00 am EST

The U.S. economy grew at an annualized rate of 2.8% in Q3, slightly below the anticipated 3% growth rate, according to the Commerce Department's advance estimate. Consumer spending, a key economic driver, rose by 3.7%, up from 2.8% in Q2, highlighting strong domestic demand. However, business investment was tepid, with a 0.3% increase, while private inventory investment and residential fixed investment showed declines.

Personal income rose by $221.3 billion, down from $315.7 billion in Q2, with disposable income increasing by 3.1% and personal savings slightly down to $1.04 trillion.

The personal savings rate also decreased from 5.2% in Q2 to 4.8% in Q3.

ADP Job Creation increased to 233,000 mainly on education and health, utilities and hospitality job

10/30/2024 10:00 am EST

In October, ADP reported a strong increase in private job creation, with 233,000 jobs added—the highest monthly gain since July 2023. This figure far exceeded the expected 113,000 and came despite challenges from hurricanes in the Southeast and significant labor disruptions, such as the Boeing strike. Gains were widespread, led by education and health services (+53,000), trade, transportation, and utilities (+51,000), and leisure and hospitality (+37,000), while manufacturing saw a decline of 19,000 jobs due to the strike. Large companies (500+ employees) accounted for most of the growth, adding 140,000 jobs. The ADP report precedes the Bureau of Labor Statistics’ upcoming nonfarm payroll report, which is expected to show more conservative growth.

U.S. Job Openings decreased significantly by 418,000 to 7.4 million, lowest level since 2021

10/29/2024 10:00 am EST

In September, U.S. job openings decreased significantly, dropping by 418,000 to 7.443 million, marking the lowest level since January 2021. This reduction was largely concentrated in the South, attributed to the impacts of Hurricanes Helene and Milton. California experienced large decrease by 30% and it is the second worst state behind Nevada. Despite the decline in job vacancies, consumer confidence rose sharply in October to a nine-month high, indicating improved public sentiment towards the jobs market. This increase in consumer confidence contrasts with the notable drop in job openings, suggesting that the decrease may not reflect broader economic weaknesses. Additionally, the labor market dynamics included a rise in hires and layoffs during the month, with particular fluctuations influenced by the hurricanes and ongoing strikes in the aerospace sector. The broader economic landscape also saw a significant widening of the goods trade deficit by 14.9% to $108.2 billion, driven by a surge in imports, which predominantly accumulated as retailer inventories, potentially moderating the impact on GDP growth.

S&P Global Flash Services PMI at 55.3 showing resilience with strong domestic demand driving growth

10/24/2024 10:00 am EST

The S&P Global US Services PMI increased slightly to 55.3 in October 2024, up from 55.2 in September, continuing its trend of strong growth and exceeding market expectations of 55.

  • Overall PMI: The index remains well above the 50-mark, indicating strong expansion in the US services sector for the fifth consecutive month.

  • New Orders: Experienced the sharpest growth since April 2022, driven by robust domestic demand. However, new export business growth slowed, indicating weakness in international markets.

  • Employment: There was a decline in headcounts among service providers, but this was primarily due to non-replacement of workers leaving the sector rather than active layoffs, suggesting companies are managing workforce levels conservatively.

  • Pricing and Inflation: Selling price inflation cooled to its lowest level in over four years, which signals easing cost pressures for consumers. However, input costs, particularly due to wage pressures, continued to rise at a notable rate.

  • Outlook and Sentiment: Business optimism for the future hit a 16-month high, reflecting confidence in continued demand growth, though there remains some uncertainty tied to the upcoming presidential election.

The services sector continues to show resilience with strong domestic demand driving growth. While inflation pressures on selling prices have eased, input costs remain elevated due to wage pressures. Despite these challenges, businesses are optimistic about the future, supported by robust demand, though the political landscape could introduce some uncertainty.

S&P Global Flash Manufacturing PMI rose but still in contraction territory

10/24/2024 10:00 am EST

The S&P Global Flash US Manufacturing PMI rose slightly to 47.8 in October 2024 from 47.3 in September, reflecting a continued contraction in the US manufacturing sector, though at a slower pace.

  • Overall PMI: The index remains below 50, signaling a contraction, but the October reading shows the slowest rate of decline since August.

  • New Orders: Fell for the fourth straight month, although the rate of decline moderated from the sharp drop seen in September. Weak demand continues to pressure manufacturers.

  • Stocks of Purchases: Decreased at the fastest rate in 14 months, indicating businesses are reducing their inventories amid lower demand.

  • Production and Employment: Both declined, but the rates of decline have eased compared to previous months.

  • Supply Chain: For the first time in three months, longer lead-times were reported due to freight-related congestion and weather disruptions.

  • Inflation Pressures: Selling price inflation eased, and input cost growth dropped to a seven-month low, supported by lower fuel prices and increased competition among suppliers.

While the manufacturing sector is still facing challenges, especially with demand for new orders remaining weak, the easing rates of decline in production, employment, and cost pressures may provide some optimism. However, persistent issues like supply chain disruptions and demand shortfalls continue to weigh on the sector’s recovery.

Initial Jobless Claims decreased by 15,000 WoW, continuous unemployment claims highest since Nov 2021

10/24/2024 10:00 am EST

In the week ending October 19, 2024, the initial claims for unemployment insurance showed a notable decrease, while the insured unemployment rate rose slightly. Here are the key details:

Initial Claims:

  • Initial claims (seasonally adjusted): 227,000, which is a decrease of 15,000 from the previous week's revised level of 242,000.

  • 4-week moving average: 238,500, an increase of 2,000 from the previous week's revised average of 236,500.

Insured Unemployment Rate and Claims:

  • Insured unemployment rate: 1.3% for the week ending October 12, an increase of 0.1 percentage points from the prior week.

  • Insured unemployment claims: 1,897,000, an increase of 28,000 from the previous week's revised level of 1,869,000. This is the highest level of insured unemployment since November 2021.

  • 4-week moving average for insured unemployment: 1,860,750, an increase of 17,500 from the previous week's revised average of 1,843,250.

Overview:

  • Initial unemployment claims decreased, suggesting fewer new claims for unemployment benefits, which may signal a stabilizing labor market.

  • However, the increase in insured unemployment, or continuing claims, and the higher insured unemployment rate indicate that more people remain on unemployment benefits, marking the highest level in almost three years.

Federal Reserve Beige Book showing slow growth and declining economic activities in most regions

10/23/2024 12:00 pm EST

Overall Economic Activity:

  • General Activity: Economic activity remained mostly unchanged, with two districts reporting modest growth. Manufacturing activity was generally in decline, while the banking sector showed steady or slightly improving conditions due to lower interest rates. Consumer spending varied, with more focus on less expensive alternatives.

  • Housing Market: Home values were stable or rising slightly across most districts, though high mortgage rates kept some buyers on the sidelines. Affordable housing shortages were persistent.

  • Commercial Real Estate: Activity was largely flat, except for improvements driven by data center and infrastructure projects.

  • Agriculture and Energy: Agricultural and energy activity showed little change, with energy producers facing lower margins due to declining prices.

Labor Markets:

  • Employment: Job growth was modest, with hiring mainly for replacement rather than expansion. Worker availability improved, but certain industries (like technology, manufacturing, and construction) still struggled to find skilled workers. Wages continued to rise at a modest to moderate pace, with some slowing due to better worker availability.

  • Turnover and Layoffs: Worker turnover remained low, and layoffs were limited.

Prices:

  • Inflation: Inflationary pressures moderated, with selling prices increasing slightly to modestly. Home prices increased in many districts, while rents remained steady or slightly decreased. Firms experienced rising input costs, especially in insurance and healthcare, compressing profit margins.

Regional Highlights:

  • Boston: Flat economic activity, with price increases and international travel supporting the local economy.

  • New York: Modest economic growth with steady housing market conditions and strong capital investment plans.

  • Philadelphia: Slight declines in activity, with expectations of future growth.

  • Richmond: Modest economic growth, with hurricanes impacting some areas.

  • Atlanta: Declines in economic activity, particularly in tourism, housing, and manufacturing.

  • Chicago: Slight economic growth, with modest increases in consumer spending and employment.

  • St. Louis and Minneapolis: Steady or slightly declining activity, but some signs of optimism for the future.

  • Dallas: Modest growth driven by nonfinancial services, while manufacturing and retail sales weakened.

  • San Francisco: Stable economic conditions, with improvements in labor availability and stable prices.

While economic growth was slow or flat in most regions, there was some optimism for improvement, tempered by concerns about inflation, high mortgage rates, and uncertainty in the labor market.

Conference Board’s Leading Economic Index for U.S. fell by 0.5% in September 2024

10/21/2024 5:00 pm EST

The Conference Board's Leading Economic Index® (LEI) for the U.S. fell by 0.5% in September 2024, marking its second consecutive monthly decline, following a 0.3% drop in August. Over the six-month period from March to September 2024, the LEI dropped by 2.6%, indicating a steeper decline compared to the previous six-month period, which saw a 2.2% decrease.

Several factors contributed to the LEI's continued decline, including a persistent weakness in new factory orders, an inverted yield curve, declining building permits, and a muted outlook for future business conditions from consumers. These negative influences were not sufficiently counterbalanced by gains in other LEI components, signaling ongoing uncertainty in the economy. Justyna Zabinska-La Monica from The Conference Board noted that these factors point to a period of moderate growth through the end of 2024 and into early 2025.

Meanwhile, the Coincident Economic Index® (CEI), which tracks current economic conditions, edged up by 0.1% in September, following a 0.2% rise in August. The CEI has grown by 0.9% over the past six months, with payroll employment, personal income (excluding transfer payments), and manufacturing and trade sales all contributing positively. However, industrial production declined, slightly offsetting these gains.

The Lagging Economic Index® (LAG), which reflects changes after the economy shifts, decreased by 0.3% in September, marking a 0.2% contraction over the last six months. This marks a reversal from the 1.1% growth seen in the previous period.

In conclusion, LEI's continued decline and the LAG's negative shift indicate that economic conditions remain fragile, with potential headwinds expected as the year closes.

First National Bank of Lindsay seized by FDIC, marking 2nd failure in 2024, 7th failure since Silicon Valley bank in 2023

10/20/2024 5:00 pm EST

The closure of The First National Bank of Lindsay, Oklahoma, by the Office of the Comptroller of the Currency (OCC) marks the second bank failure in the U.S. in 2024, following the closure of Republic First Bank in Philadelphia earlier this year. The FDIC has appointed First Bank & Trust Co. of Duncan, Oklahoma, to assume the insured deposits of the failed bank, ensuring continuity for depositors. The bank's sole branch will reopen under its new ownership on Monday, October 21, 2024, with all insured deposits still covered by the FDIC.

The First National Bank of Lindsay had total assets of $107.8 million as of June 30, 2024, and deposits amounting to $97.5 million, of which $7.1 million exceeded FDIC insurance limits. The FDIC will begin to return 50% of uninsured funds starting Monday, with the possibility of further recoveries as the bank's assets are sold.

The FDIC's Deposit Insurance Fund (DIF) is expected to incur an estimated cost of $43 million due to the bank's failure, which the FDIC attributed to alleged fraud. First Bank & Trust Co. will assume the insured deposits and purchase approximately $20 million of the failed bank's assets, while the FDIC will retain the remaining assets for later disposition.

Customers with deposits exceeding $250,000 are encouraged to contact the FDIC to discuss their insurance coverage and options, and to visit the FDIC website for further information starting Monday. The FDIC has set up a toll-free line and extended hours to assist customers.

Mortgage Rates increased to 3 weeks high at 7% with homebuying activity declined by 7% Weekly

10/20/2024 12:00 pm EST

Mortgage rates in the U.S. rose for the third consecutive week, with the average 30-year fixed-rate mortgage reaching 6.44%, the highest level since August. The increase from 6.32% the previous week has further slowed activity among both homebuyers and refinancers. Similarly, 15-year mortgage rates rose to 5.63% from 5.41%.

These rising rates, reflecting economic strength and market expectations about the Federal Reserve’s future rate cuts, have led to a significant reduction in refinancing activity, which dropped 26% in a week, according to the Mortgage Bankers Association. Homebuying activity also declined by 7% week-over-week, despite rates being over a percentage point lower than last year. Many potential buyers are still cautious, even though purchase applications remain about 7% higher compared to the same period in the previous year.

United Kingdom ‘s inflation fallen below the BOE’s 2% target

10/19/2024 12:00 pm EST

Inflation in the U.K. dropped sharply to 1.7% in September 2024, marking the first time since April 2021 that inflation has fallen below the Bank of England's (BOE) 2% target. This unexpected decrease from 2.2% in August, along with core inflation falling to 3.2%, has increased market expectations for a BOE rate cut in November. Money markets now price a 92% chance of a 25-basis-point cut, with another reduction in December likely, which would lower the BOE's key rate to 4.5%.

This inflation drop is driven by easing price pressures in the services sector, which saw inflation slow from 5.6% in August to 4.9% in September. The pound fell against both the U.S. dollar and the euro following the news, and yields on U.K. government bonds (gilts) dropped as well.

Economists remain cautious, however, noting potential risks, including an increase in the energy price cap in October and the anticipated U.K. budget at the end of the month, which could have inflationary effects.

China’s economy experiencing slowest growth in 18 months

10/19/2024 11:00 am EST

China's economy experienced its slowest growth in 18 months in the third quarter of 2024, expanding by 4.6% year-on-year. Despite recent stimulus measures, optimism has faded as details of a major property sector bailout remain unclear. Weak consumer spending and a prolonged property crisis continue to hamper growth, with September's inflation data pointing to deflation risks. Although authorities have eased home-buying restrictions and announced plans to boost credit for unfinished housing projects, economists believe more direct fiscal stimulus is needed to revive the economy. Investors are waiting for clearer strategies to drive long-term, consumption-driven growth.

Initial Jobless Claim Decreased on October 17th Week But With Continuous Long Term Increase Trend

10/17/2024 11:00 am EST

The unemployment data for the week ending October 12 reveals a decline in initial claims, reflecting a potentially strengthening labor market despite some increases in longer-term metrics:

  1. Initial Claims:

    • Seasonally adjusted initial claims: 241,000 (down by 19,000 from the previous week).

    • Previous week's claims were revised up from 258,000 to 260,000.

    • The 4-week moving average of initial claims rose by 4,750 to 236,250 (from the revised 231,500).

  2. Insured Unemployment (continuing claims):

    • The seasonally adjusted insured unemployment rate was steady at 1.2%.

    • The insured unemployment number for the week ending October 5 was 1,867,000, a slight increase of 9,000 from the revised 1,858,000.

    • The 4-week moving average for insured unemployment increased by 11,500 to 1,842,750 (from the revised 1,831,250).

This suggests that while there was a short-term drop in initial claims, the longer-term metrics such as the insured unemployment and its moving average saw minor increases, signaling a mixed but relatively stable labor market.

China continues to experience deflation pressure in September 2024

10/13/2024 11:00 am EST

China's economic landscape is showing signs of deepening challenges, as the latest data on consumer inflation and producer prices reveal a more sluggish economy than anticipated. In September 2024, China's consumer price index (CPI) rose by only 0.4% year-on-year, falling short of the expected 0.6% increase and marking the slowest pace of inflation in three months. This indicates weak consumer demand, which is concerning for a country aiming to stimulate domestic consumption.

On the production side, the producer price index (PPI) registered a sharper-than-expected decline, falling 2.8% year-on-year, which is a significant drop compared to the 1.8% decline in August. This deepening producer price deflation signals that Chinese companies continue to face falling prices for their goods, which can squeeze profit margins and discourage investment and production.

Germany’s Economic Downturn continues for the 2nd consecutive year

10/12/2024 11:00 am EST

Germany’s economic downturn deepening through 2024 underscores significant structural challenges, especially in manufacturing and global competition, with a particular strain from China. This year, Germany is projected to shrink by 0.2%, marking its second consecutive year of contraction, following a 0.3% decline in 2023. This makes it the only G7 nation facing a recession in 2024.

The German government's 49-measure growth package is crucial to reversing this trend, focusing on investment and productivity improvements. Economy Minister Robert Habeck emphasized that these reforms, alongside falling inflation and wage increases, could pave the way for recovery. Growth is expected to return in 2025, with GDP projected to rise by 1.1%, driven by an upturn in private consumption and stabilizing inflation. By 2026, growth may reach 1.6%.

However, deep-rooted structural challenges persist, including decarbonization, digitalization, demographic shifts, and competition in key industries like automotive and mechanical engineering. The Manufacturing PMI reflects ongoing struggles, with Germany’s September 2024 reading at 40.6, signaling its 27th consecutive month of contraction.

Foreign takeovers and international investments, such as BASF’s new factory in China, highlight the pressure on German firms to seek growth outside of domestic markets. While these moves may bring relief, they underscore the significant restructuring required to address Germany's long-term economic challenges.

University of Michigan’s consumer sentiment index fell to 68.9 in October 2024

10/10/2024 11:00 am EST

In October 2024, the University of Michigan's consumer sentiment index fell to 68.9 from 70.1 the previous month, missing the forecasted 70.8. This decline was seen in both the current conditions index, which dropped slightly from 63.3 to 62.7, and the expectations index, which decreased from 74.4 to 72.9. Notably, inflation expectations for the coming year increased to 2.9% from 2.7%, although the five-year outlook slightly improved, dropping to 3% from 3.1%. According to Joanne Hsu, the Director of Surveys of Consumers, while long-term business conditions saw the highest positivity in six months, consumers continue to be frustrated by high prices, and sentiments around current and expected personal finances have weakened.

Producer Price Index unchanged in September MoM , 1.8% YoY

10/10/2024 10:00 am EST

In September, the Producer Price Index (PPI) for final demand remained unchanged, as reported by the U.S. Bureau of Labor Statistics. This stability follows a modest 0.2 percent increase in August and no change in July. Over the past twelve months, the unadjusted final demand index rose by 1.8 percent.

Breaking it down, the September data revealed a balance between sectors: a 0.2 percent increase in the index for final demand services counteracted a corresponding 0.2 percent decrease in prices for final demand goods. The core index, which excludes food, energy, and trade services, saw a slight increase of 0.1 percent in September, continuing from a 0.2 percent rise in August. Annually, this core index has increased by 3.2 percent.

Delving deeper, the rise in final demand services was broadly supported, with significant contributions from a variety of sectors. Notably, deposit services surged by 3.0 percent. Other areas such as machinery and vehicle wholesaling, furniture retailing, and airline passenger services also saw price increases. In contrast, there was a significant 6.3 percent drop in the margins for professional and commercial equipment wholesaling, alongside declines in securities brokerage and consumer loans.

For final demand goods, the September decline was primarily driven by a sharp 2.7 percent decrease in energy prices, particularly with gasoline prices falling by 5.6 percent. However, there were increases in other areas such as processed poultry, which soared by 8.8 percent, and in the indexes for electric power and motor vehicles, which provided some upward pressure on the goods segment of the index.

Consumer Price Index rose 2.4% YoY and Core CPI 3.3% YoY

10/10/2024 10:00 am EST

The Consumer Price Index for All Urban Consumers (CPI-U) recorded a steady increase of 0.2 percent in September, consistent with the growth observed in August and July, according to the U.S. Bureau of Labor Statistics. Over the past year, the all items index has seen a rise of 2.4 percent before seasonal adjustment.

In September, significant contributors to the monthly increase were the shelter and food indexes, which together accounted for over 75 percent of the rise. Specifically, the food at home index went up by 0.4 percent, and the food away from home index increased by 0.3 percent. Conversely, the energy index experienced a notable decline of 1.9 percent, following a 0.8 percent drop the previous month.

Excluding food and energy, the core index rose by 0.3 percent in September, mirroring the increase seen the prior month. Among the rising indexes were those for shelter, motor vehicle insurance, medical care, apparel, and airline fares, while recreation and communication indexes saw declines.

Year-over-year, the all items index has climbed by 2.4 percent as of September, marking the smallest 12-month increase since February 2021. The core index, excluding food and energy, has increased by 3.3 percent over the past year. The energy index has decreased by 6.8 percent, whereas the food index has grown by 2.3 percent over the same period.

Initial Jobless Claims increased to 258,000 in the week ending October 5th

10/10/2024 10:00 am EST

The latest weekly report on U.S. jobless claims shows a significant increase in initial claims, which rose by 33,000 to reach 258,000 for the week ending October 5. This spike brings initial claims to their highest level since August 5, 2023, matching the previous high of 258,000. The four-week moving average also increased to 231,000, up by 6,750 from the prior week's average.

Despite the jump in initial claims, the insured unemployment rate remained steady at 1.2% for the week ending September 28. However, the total number of people receiving benefits saw an increase, rising by 42,000 to 1,861,000. Additionally, the four-week moving average for insured unemployment rose slightly by 4,500 to 1,832,000, reflecting a modest upward trend in sustained unemployment levels. These figures suggest some growing pressures within the labor market, potentially signaling shifts in employment stability.

NBIR small business optimism remains low in the economy

10/09/2024 11:30 pm EST

The NFIB Small Business Optimism Index for September paints a picture of cautious sentiment among small business owners.

  1. Optimism Remains Below Long-Term Average:

    • The index rose slightly by 0.3 points to 91.5 in September, but it marks the 33rd consecutive month below the 50-year average of 98. This shows a prolonged period of subdued optimism among small business owners.

  2. Rising Uncertainty:

    • The Uncertainty Index increased sharply by 11 points to 103, the highest on record, indicating heightened concerns about future business conditions.

  3. Capital Outlays and Inventory:

    • Capital Outlays: Only 51% of owners reported capital expenditures in the last six months, down five points from August. Planned capital outlays in the next six months also dropped, reflecting hesitation to invest amid economic uncertainty.

    • Inventory Levels: A net negative 13% of owners reported inventory gains, the lowest reading since June 2020, suggesting a pullback in stocking up on goods. A net negative 3% plan further inventory investment in the coming months.

  4. Challenges in Hiring and Labor Costs:

    • Job Openings: The share of owners reporting job openings they could not fill fell to 34%, the lowest since January 2021. Of those hiring, 90% reported few or no qualified applicants.

    • Compensation: While a net 32% of owners reported raising compensation, this was the lowest level since April 2021. Still, 23% plan to raise wages in the next three months.

  5. Financing Costs on the Rise:

    • The average interest rate on short-maturity loans increased to 10.1%, the highest since February 2001. This rise in borrowing costs may deter further investment and expansion.

  6. Inflation Remains a Primary Concern:

    • Twenty-three percent of business owners cited inflation as the top problem, with higher input and labor costs continuing to strain profit margins. Price hikes were most prevalent in finance, retail, transportation, and construction sectors.

  7. Profitability and Sales Trends:

    • Profit trends remained weak, with a net negative 34% of owners reporting lower profits. Weaker sales were the primary factor, though rising costs for materials and labor also contributed. However, the percentage of owners expecting higher real sales volumes improved to a net negative 9%.

  8. Access to Credit and Borrowing Needs:

    • Credit conditions remain relatively stable, with only 2% of owners indicating that their borrowing needs were not satisfied. A majority (62%) were not interested in obtaining a loan.

While there are slight signs of improvement in optimism, small business owners are clearly grappling with uncertainty, high financing costs, inflation, and labor challenges.

This cautious stance is reflected in reduced capital spending, slower inventory accumulation, and restrained hiring plans.

Consumer credit experienced slower growth than expected

10/09/2024 11:00 pm EST

Credit condition declines in August 2024 report with the following changes from consumers’ sentiment:

  1. Slower Growth in Total Consumer Credit:

    • Total outstanding consumer credit grew at an annual rate of 2.1% in August, significantly lower than July's 6.3% growth rate and June's 0.8%.

    • The total consumer credit outstanding reached $5.098 trillion by the end of August.

  2. Revolving vs. Nonrevolving Credit:

    • Revolving Credit (primarily credit card debt) saw a decrease, contracting at an annual rate of 1.2%. This is notable as it's the largest drop in credit card balances since March 2021.

    • Nonrevolving Credit (such as auto and student loans) grew at a 3.3% annual rate, which helped offset the decline in revolving credit.

  3. Forecast vs. Actual Growth:

    • The $8.9 billion increase in consumer credit fell short of forecasts, with economists surveyed by Bloomberg predicting a $12 billion increase, while Seeking Alpha’s consensus was $11.8 billion.

  4. Impact of Credit Card Interest Rates:

    • The reduction in revolving credit growth aligns with efforts by consumers to manage credit card debt amid record-high interest rates in August, potentially curbing borrowing behaviors.

Unemployment Rate at 4.1%, 235,000 Job added in September

10/04/2024 10:00 pm EST

In September, the U.S. unemployment rate remained steady at 4.1%, with 6.8 million individuals unemployed, showing a slight increase from last year's figures of 3.8% and 6.3 million, respectively. While the unemployment rate for adult men decreased to 3.7%, rates for other major groups such as adult women, teenagers, Whites, Blacks, Asians, and Hispanics saw little change. The number of people unemployed for less than five weeks fell by 322,000 to 2.1 million, but the count of long-term unemployed remained stable at 1.6 million, marking an increase from the previous year.

The labor force participation rate held at 62.7%, and the employment-population ratio was stable at 60.2%. Part-time employment due to economic reasons was consistent at 4.6 million, up from 4.1 million a year earlier, indicating a rise in those unable to find full-time work. About 5.7 million people were out of the labor force but wanted a job, with those marginally attached to the labor force increasing by 204,000 to 1.6 million. Discouraged workers remained about the same at 445,000, reflecting ongoing challenges in the labor market.

Initial Jobless Claims Climbed to 225,000, a slight uptick from 219,000 in previous week

10/04/2024 10:00 pm EST

In the week ending September 28, the U.S. saw a slight uptick in initial jobless claims, with the number rising by 6,000 to 225,000, compared to the previous week's revised figure of 219,000. Despite this week-over-week increase, the four-week moving average of claims, which smooths out some of the weekly volatility, decreased slightly by 750 to 224,250. The insured unemployment rate held steady at 1.2 percent, with the number of insured unemployed dipping marginally by 1,000 to 1,826,000. These figures suggest a generally stable labor market, with minor fluctuations in weekly claims but a small decrease in the average number of claims over the past month.

September manufacturing PMI at 47.2%, signaling continual contraction

10/02/2024 10:00 pm EST

The September Manufacturing PMI® came in at 47.2 percent, indicating a contraction in the manufacturing sector but still pointing to expansion in the overall economy for the 53rd consecutive month since April 2020. Key indices within the PMI report varied:

  1. New Orders Index: Continued in contraction at 46.1 percent, though slightly improved from August's 44.6 percent.

  2. Production Index: Showed improvement, nearing expansion at 49.8 percent, up significantly from 44.8 percent in August.

  3. Prices Index: Entered contraction for the first time this year at 48.3 percent, a substantial drop from 54 percent in the prior month, suggesting decreasing material costs.

  4. Backlog of Orders Index: Slightly improved to 44.1 percent, indicating a continuing reduction in backlogs.

  5. Employment Index: Decreased to 43.9 percent, down from 46 percent, reflecting job cuts or slower hiring in the sector.

The report also noted slower supplier deliveries, a typical sign of increasing demand, with the Supplier Deliveries Index at 52.2 percent. However, the Inventories Index fell sharply to 43.9 percent, indicating lower inventory levels among manufacturers. Additionally, both the New Export Orders and Imports Indexes remained in contraction, reflecting challenges in international trade.

Overall, the data suggests that while the broader economy expands, the manufacturing sector is experiencing a slowdown with lower prices, reduced employment, and contracting new orders and exports. This mixed picture could influence future decisions by policymakers, particularly with regard to interest rates and economic stimulus measures.

Private Companies add 143,000 jobs in September, annual pay increase slowed to 4.7%

10/02/2024 08:00 pm EST

In September, private employers added 143,000 jobs, marking a recovery across most sectors after a period of five months characterized by slower job growth. Notably, the manufacturing sector experienced its first job additions since April, highlighting a positive shift in this area. However, the information sector did not share in this positive trend, as it was the only sector to report job losses during the month. This data signals a potential stabilization or improvement in the labor market, with broad-based gains suggesting resilience in various industries.

The rate of annual pay increases for employees slowed compared to the previous month, according to ADP's data. Job-stayers saw their year-over-year pay gains decrease slightly to 4.7%, while job-changers experienced a more noticeable drop from 7.3% in August to 6.6%.

Pay increases varied by industry sector and firm size:

  • Goods-producing sectors saw pay gains ranging from 3.6% in natural resources/mining to 5.1% in construction and 4.6% in manufacturing.

  • Service-providing sectors had variations in pay gains, with education/health services and leisure/hospitality sectors tied at the higher end, each at 5.1%, and information sector reporting lower pay gains at 4.4%.

Firm size also played a role in the median change in annual pay for job-stayers:

  • Small firms with 1-19 employees had the smallest pay gain at 4.0%, whereas those with 20-49 employees saw a higher increase at 4.6%.

  • Medium-sized firms showed stronger pay increases, with those employing 50-249 workers seeing a 5.0% rise, and those with 250-499 employees experiencing a 4.8% increase.

  • Large firms with 500 or more employees reported a pay gain of 4.7%.

These insights suggest a cooling in wage growth across various sectors and firm sizes, reflecting broader economic shifts and potentially influencing future labor market dynamics.

Japanese Nikkei Futures down 4.8% after Shigeru Ishiba winning the leadership

09/29/2024 10:00 pm EST

Immediate market reactions to Shigeru Ishiba winning the leadership of Japan's ruling party, which has implications for monetary policy and market trends:

  1. Yen Strengthening: Following Ishiba's victory, the yen surged by as much as 1.4% against the dollar, a sharp reversal after weakening earlier in the day. The market had previously expected a victory for Ishiba's opponent, Sanae Takaichi, which led to yen depreciation.

  2. Stock and Bond Market Reaction: Japanese stock futures, particularly the Nikkei 225, dropped by 4.8% in after-hours trading following the yen's gains, even though the Nikkei 225 closed higher earlier in the day. The futures market anticipated potential policy shifts under Ishiba that could lead to higher interest rates, a negative factor for stocks. Bond futures slumped as well, reflecting expectations for rising yields.

  3. Political and Monetary Policy Implications: Ishiba, seen as more supportive of a gradual interest rate hike strategy from the Bank of Japan (BOJ), is expected to influence monetary policy. However, the BOJ, under Governor Kazuo Ueda, is cautious about raising rates too quickly. The result also shifts focus to the interest rate gap between Japan and the US, which will affect yen trading in the future.

US consumer confidence dropped in September 2024

09/27/2024 10:00 pm EST

In September 2024, the U.S. Consumer Confidence Index fell sharply to 98.7, down from 105.6 in August, according to The Conference Board. This marked the largest decline since August 2021. The drop was primarily driven by consumers' growing concerns about the labor market, despite the overall job market remaining relatively healthy with low unemployment and stable wages.

The Present Situation Index, which reflects current business and labor market conditions, decreased by 10.3 points to 124.3, indicating a more pessimistic view of the economic environment. Meanwhile, the Expectations Index, reflecting consumers' short-term outlook on income, business, and labor market conditions, dropped 4.6 points to 81.7. Although still above the threshold signaling a recession, this represents a growing unease about the future.

Consumers aged 35 to 54 experienced the steepest confidence decline, making them the least confident group, while those under 35 remained the most optimistic. Confidence fell across most income groups, with individuals earning less than $50,000 seeing the largest drop.

Despite the overall drop, certain areas like home and car buying plans improved slightly on a six-month average basis. While inflation concerns remain significant, average 12-month inflation expectations rose to 5.2%, still below the March 2022 peak of 7.9%. However, the proportion of consumers anticipating higher interest rates continued to decline, while expectations for lower rates increased.

Overall, consumer sentiment is increasingly cautious, with concerns about the labor market, inflation, and economic conditions shaping their outlook for the coming months.

Business Conditions:

18.8% of consumers rated business conditions as "good," down from 21.1% in August.

20.2% of consumers considered business conditions "bad," up from 17.3%.

Labor Market:

30.9% of consumers felt that jobs were "plentiful," down from 32.7%.

18.3% of consumers reported that jobs were "hard to get," an increase from 16.8%.

source: The Confernce Board

Housing Price Growth slowest since November 2023

09/27/2024 10:00 pm EST

The U.S. housing market continues to experience high prices, particularly in the 20 largest metro areas, with the S&P CoreLogic Case-Shiller 20-city house-price index rising by 0.3% in July compared to the previous month. However, the rate of increase has slowed, with home prices rising 5.9% over the past year, down from 6.5% the previous month. This represents the slowest pace of growth for the index since November 2023.

Despite this deceleration, home prices have reached all-time highs, and some cities, like New York, are experiencing significant year-over-year increases (up 8.8%). Conversely, cities like Portland saw much slower growth, with prices rising only 0.8%. On a broader scale, the national home price index rose by 0.2% in July and 5% over the past year.

The report highlights a potential shift toward a buyer’s market, with declining mortgage rates and slowing price appreciation possibly improving housing affordability. The forward path of the housing market remains unknown as sold home prices are starting to see 20% lower than selling home prices. With the increase in unemployment rate and slower hiring rate in the US Labor market, the incentives to purchase a home will not increase without a significant price drop from the seller. It is likely that the housing market is slowly shifting towards buyer’s market in the coming years.

PCE Index shows stability in Year over Year change of 2.2%

09/27/2024 10:00 pm EST

In August, personal income in the U.S. saw a modest increase of $50.5 billion or 0.2%, according to the Bureau of Economic Analysis. Disposable personal income (DPI) also rose by $34.2 billion, matching the increase in personal consumption expenditures (PCE), which went up by $47.2 billion. Both the PCE price index and the core PCE price index, which excludes food and energy, rose by 0.1%.

This period also witnessed a real increase in DPI and PCE by 0.1%, reflecting a slight uptick in services spending by 0.2%, while goods spending remained nearly flat. Year-over-year, the PCE price index grew by 2.2%, with the core index up by 2.7%, indicating sustained price pressures in the economy outside of volatile food and energy costs. The changes in spending habits saw services spending increase by $54.8 billion, particularly in housing and financial services, whereas spending on goods decreased by $7.6 billion, largely due to a drop in new motor vehicle purchases.

Personal saving totaled $1.05 trillion, with the personal saving rate at 4.8%, showing a continued cautious stance by consumers amidst variable economic signals. This economic snapshot highlights the ongoing adjustments in consumer behavior and price dynamics as the U.S. navigates through varying economic conditions.

Initial Jobless Claims dropped slightly to 218,000 from revised number from previous week of 222,000

09/26/2024 09:30 pm EST

In the week ending September 21, initial claims for unemployment benefits totaled 218,000, which was a decrease of 4,000 from the previous week. Notably, the prior week’s figure was revised up by 3,000, from 219,000 to 222,000.

The 4-week moving average, which smooths out weekly volatility, also saw a decrease. It dropped by 3,500 to 224,750, after the previous week's average was revised up slightly by 750 from 227,500 to 228,250.

These adjustments reflect the ongoing refinements and slight improvements in the labor market.

Yield curve shows wider un-inversion as 10 year - 2 year spread widened to 0.25

09/24/2024 09:30 pm EST

This transition from a previously negative spread (inverted curve) to a positive spread has important implications for the economy.

  1. Reversal of Recessionary Signal:

    • A yield curve inversion is often a signal of an impending recession, as investors expect the central bank (e.g., the Federal Reserve) to cut rates in the future due to slowing economic growth. When the yield curve uninverts, it may indicate that markets believe the worst is behind and economic growth might stabilize, thus alleviating recession fears.

  2. Market Optimism:

    • The movement into positive territory suggests growing optimism about future economic conditions. Investors may feel that inflation is under control and that central banks will not need to raise rates further, helping improve long-term growth prospects.

  3. Potential Risks:

    • Despite the uninversion, history shows that recessions can still follow yield curve inversions with a lag. For instance, uninversion occurred before recessions in past cycles, such as before the 2008 financial crisis, meaning that while market sentiment improves, underlying economic pressures could still trigger a recession.

  4. Monetary Policy Implications:

    • The uninversion may be seen by the Federal Reserve as a sign that their policies are working to curb inflation without overly damaging growth. This could lead the Fed to pause or slow rate hikes in the near future, easing pressure on borrowing costs and stimulating growth.

  5. Credit Conditions:

    • A positive yield spread can improve credit conditions, as banks typically borrow short-term and lend long-term. As this spread increases, it could encourage more lending, supporting economic activity.

China’s central bank released large stimulus package to re-ignite the Chinese Economy

09/24/2024 12:30 pm EST

China's central bank, the People's Bank of China (PBOC), recently introduced its most significant stimulus package since the pandemic to revive the nation's slowing economy. The broad measures aim to combat deflation and propel growth back towards the government's target of roughly 5%. The stimulus includes reduced borrowing costs, additional liquidity injections, and measures to ease household mortgage burdens.

The stimulus package includes the following policy changes to the Chinese economy:

  1. Lower Reserve Requirement Ratio (RRR): The central bank plans to cut the RRR by 50 basis points, releasing about 1 trillion yuan ($142 billion) for new lending. This move may be followed by further reductions depending on liquidity conditions.

  2. Interest Rate Cuts: The PBOC will reduce the seven-day reverse repo rate, its new benchmark, by 0.2 percentage points to 1.5%, among other cuts.

  3. Property Market Support: Measures such as a 50 basis point reduction in mortgage interest rates and a cut in the minimum down payment requirement to 15% on all homes have been introduced to address the prolonged property market downturn.

Despite these steps, analysts have raised concerns about the effectiveness of these policies. Demand for credit remains weak, and consumer confidence, particularly in the property market, has not yet rebounded significantly. Some economists argue that more aggressive fiscal stimulus, beyond monetary measures, may be necessary to achieve sustained growth.

The PBOC also launched two new tools to support capital markets, including a 500 billion yuan stock-buying swap program and a 300 billion yuan loan scheme for commercial banks to facilitate stock purchases and buybacks.

While Chinese stocks and bonds rallied in response to the announcement, experts suggest that the moves, although positive, may not be sufficient on their own. More robust fiscal interventions might be required to address structural issues, such as weak consumer confidence and uncertainty in the property sector.

United Kingdom’s services PMI fell to 52.8 and manufacturing PMI declined to 51.5

09/23/2024 05:30 pm EST

In September, private business activity in the UK grew at a slower pace than anticipated, as indicated by the latest Purchasing Managers' Index (PMI) survey from S&P Global. The overall composite PMI dropped to 52.9 in September, down from 53.8 in August. While business activity has now expanded for 11 consecutive months, a slowdown in both the manufacturing and services sectors has led to the first easing in recovery momentum since June.

Breaking down the data, the services PMI fell to 52.8 from 53.7, marking a two-month low, and the manufacturing PMI declined to 51.5 from 52.5, the lowest level in three months. Despite these slowdowns, a PMI reading above 50 still indicates expansion, suggesting that growth continues, albeit at a more moderate pace.

Global economies are in contraction with PMI below 50

09/23/2024 03:30 pm EST

As of the most recent data in August 2024, several economies are experiencing contractions in their manufacturing sectors, as indicated by their PMI values falling below 50:

  1. China - 49.1 shows a declining trend, with its PMI consistently below 50 in recent months, reflecting a slowdown in its manufacturing activity.

  2. Germany - 42.4 is experiencing heavy contraction and reporting a PMI below 50, indicating continued contraction in one of Europe’s largest industrial economies.

  3. The Eurozone - 45.8, represented as a collective, similarly exhibits a PMI below the 50 threshold, pointing to ongoing struggles within the broader European manufacturing sector.

  4. The United Kingdom - 52.5 has sustained a PMI slightly above 50, suggesting contraction in its manufacturing output.

  5. Russia - 52.1 has also dipped to slightly above 50 mark, signaling a downturn in manufacturing.

In contrast, other economies such as the United States, Japan, and India are showing PMI values closer to or above 50, indicating that their manufacturing sectors are relatively more stable or expanding.

This data highlights a divergence in manufacturing performance, with advanced economies such as Germany and the Eurozone facing prolonged contraction, while emerging markets like India continue to show resilience. The ongoing contraction in key economies could signal broader economic concerns, especially for regions heavily reliant on industrial output.

Source: https://www.statista.com/statistics/1033981/pmi-developed-emerging-countries/

Commercial Banks and Credit Card Delinquency Rate rose from 2% to 3.25% between 2021 to 2024

09/22/2024 12:30 am EST

The recent trend of delinquency rates on credit card loans shows a rise since the mid-2020s, particularly after the effects of the COVID-19 pandemic. From the data in the chart, the following points stand out regarding the most recent growth:

  • 2020-2024:

    • The delinquency rate reached a low point in 2021 following pandemic-related stimulus measures that likely helped individuals manage debt.

    • After this low point, there was a consistent upward trend as the effects of those temporary economic supports waned.

    • The delinquency rate increased gradually from around 2.0% in 2021 to 3.25% in Q2 2024.

  • Percentage Growth:

    • The growth from 2.0% to 3.25% represents a 62.5% increase in the delinquency rate from 2021 to 2024.

This rise in delinquencies can be attributed to factors like the ending of stimulus payments, inflationary pressures, rising interest rates, and the overall economic recovery patterns, which may have left some consumers struggling with debt repayment.

Germany GDP shows that the economy is going through recession

09/21/2024 10:30 am EST

Germany is currently experiencing a recession in 2024. After a contraction in 2023, the economy continues to face significant challenges. While there was slight growth in early 2024, the economy remains weak with limited recovery prospects in the short term. Key drivers of this downturn include high energy costs, weakened industrial production, and sluggish domestic demand. Exports, particularly from energy-intensive industries, have also suffered, while corporate investment sentiment remains low due to geopolitical risks and high interest rates.

According to Nomura, Germany's GDP is projected to shrink by 0.2% in 2024, with only modest growth expected in 2025. Although inflation is easing, it remains high enough to restrain consumer spending. The labor market is also weakening, with rising unemployment and reduced hours worked in industries such as manufacturing. Despite fiscal space, Germany's strict budgetary rules limit the scope for government spending to stimulate the economy further​.

Germany's economic challenges are expected to persist, with stagnation forecasted in the near term before a potential slow recovery in 2025.

Initial Jobless Claims in week Sept 14 2024 shows sign of stability, but constant revisions in previous period shows signs of caution to investors

09/21/2024 10:00 am EST

U.S. initial jobless claims for the week ending September 14 shows positive signs in the labor market:

  • Initial jobless claims dropped to 219,000, a decrease of 12,000 from the previous week's revised figure of 231,000. This suggests fewer people filed for unemployment benefits, indicating potential strength in the labor market.

  • The four-week moving average of claims, which smooths out volatility, also decreased by 3,500 to 227,500.

  • For insured unemployment (ongoing claims), the rate remained steady at 1.2%, while the actual number of insured unemployed individuals dropped to 1,829,000, down 14,000 from the previous week.

  • The four-week moving average for insured unemployment also fell to 1,844,250, reflecting a longer-term decline in unemployment claims.

These trends suggest that the labor market is relatively stable, with fewer people filing for unemployment benefits and continuing claims showing a modest decrease.

However, revisions to prior weeks' figures adjusted the overall trend and it is likely to continue, indicating a need for caution in interpreting short-term fluctuations.

Yield curve shows wider un-inversion as 10 year - 2 year spread widened to 0.18 after Fed’s Rate Cut this week

09/20/2024 09:30 pm EST

Recessions tend to occur after the yield curve reverts from being inverted (when short-term yields are higher than long-term yields) back to a normal (positive) slope. This is because:

  1. Yield Curve Inversion: An inversion of the yield curve signals that investors expect economic slowdowns or lower inflation in the future. It's often a precursor to a recession, as the market anticipates central banks may need to lower interest rates in response to slower growth or a recession.

  2. Uninversion: After the inversion, when the yield curve “uninverts” and returns to a positive slope, this does not immediately mean economic recovery. Historically, the recession typically happens after this uninversion phase.

    This occurs because:

    • Central banks often cut interest rates aggressively after recognizing the economy is weakening, which pushes short-term yields lower.

    • However, the lag between the yield curve uninverting and the onset of recession can vary widely, from several months to more than a year.

Thus, while the spread returning to positive territory (as seen in the image) might signal improving investor sentiment, it doesn’t mean the risk of a recession has passed. In fact, many economic downturns in the past (such as the early 2000s and the Great Recession) occurred after the yield curve had uninverted.

Quick change of stance by Federal Reserve from ‘higher for longer’ to 50bps cut shows potential of more problems in US economy

09/18/2024 09:30 pm EST

A rapid shift in the Federal Reserve's stance from a "higher for longer" approach to cutting interest rates by 50 basis points (bps) may signal underlying concerns about the U.S. economy. This kind of pivot can suggest that the Fed sees mounting risks to economic growth, or potential trouble in areas like:

  1. Slower Growth: The rate cut could reflect concerns that economic expansion is slowing more rapidly than expected, with potential impacts on business activity, consumer spending, or investment.

  2. Labor Market Weakness: While the Fed has noted that job gains have slowed and unemployment has ticked up slightly, a significant interest rate cut may indicate deeper worries about employment prospects and the overall health of the labor market.

  3. Financial Market Strain: A quick pivot could also indicate strain in financial markets, such as tightening credit conditions or liquidity issues, which may warrant a more accommodative stance to support stability.

  4. Recession Fears: Cutting rates could signal a heightened risk of recession, as the Fed may be attempting to preemptively ease monetary policy to cushion the economy from a downturn.

  5. Disinflationary Pressure: Although inflation has made progress towards the Fed’s 2% target, a substantial rate cut might suggest that disinflationary forces are stronger than expected, and the Fed is concerned about a potential slide into too-low inflation or even deflation.

While the Fed maintains that it is monitoring a wide range of economic data, this swift shift could indicate a response to more immediate and pressing economic risks. Nonetheless, the cut could also be a proactive move to sustain economic growth and achieve the Fed's dual mandate of maximum employment and price stability.

Federal Reserve cuts 50bps in Fed Fund Rates during Sep 18th FOMC Meeting

09/18/2024 08:10 pm EST

The latest statement suggests that the Federal Reserve's Federal Open Market Committee (FOMC) is observing continued expansion in U.S. economic activity, albeit with some signs of moderation:

  • Job gains have slowed, and the unemployment rate has risen slightly but remains low overall.

  • Inflation has moved closer to the Committee's 2% target but still remains somewhat elevated.

In response to these conditions, the FOMC has:

  • Lowered the federal funds rate by 0.5 percentage points to a target range of 4.75% to 5%.

  • Reiterated that future rate adjustments will depend on ongoing data and risks to the economy.

  • Continued reducing its holdings of Treasury securities, agency debt, and mortgage-backed securities as part of its broader monetary policy.

PCE Inflation Projection -

2024: Most participants projected inflation in the 2.1-2.2% range, though some expect it to be higher.

2025: Projections shift slightly lower, with the majority still expecting inflation around 2.1-2.2%.

2026: More participants predict inflation between 1.9-2.0%, signaling further decline.

2027: A majority anticipate inflation in the 1.9-2.0% range, aligning with the Fed's 2% target.

Longer Run: Nearly all participants project inflation to stabilize around 1.9-2.0%.

Fed Fund Rates Projection -

2024: Projections are fairly spread out, with a notable number of participants predicting midpoints ranging from 4.63% to 5.12%.

2025: Expectations converge more around lower rates, with the most common projections between 4.12% and 4.37%.

2026: The range of projections broadens slightly, but many still see midpoints near the 4% to 4.37% range.

2027: Participants' judgments shift lower, with the most concentration around 3.13% to 3.87%.

Longer Run: Over the longer term, most participants believe the rate will stabilize, with many projections clustering around 2.88% to 3.62%.

This indicates a general expectation that the federal funds rate will trend downwards over the coming years and stabilize at a lower level in the long run compared to current rates.

Retail Sales up by 0.1% in August 2024

09/17/2024 10:30 am EST

Total sales for retail and food services reached $710.8 billion, reflecting a modest month-over-month increase of 0.1% and a year-over-year rise of 2.1%.

  • June through August 2024 sales increased by 2.3% compared to the same period in 2023.

  • The June to July 2024 sales change was revised upward from 1.0% to 1.1%.

For retail trade sales:

  • Sales were up 0.1% from July 2024 and 2.0% from August 2023.

  • Nonstore retailers (e.g., online sales) saw a significant increase of 7.8% compared to August 2023.

  • Food services and drinking places experienced a 2.7% increase from August 2023.

These figures suggest steady growth in U.S. retail and food services sales, with particular strength in nonstore retail sectors.

CME FedWatch tool shows 50% of 25bps and 50 bps cut next week by Fed after cooling CPI and PPI report

09/14/2024 10:00 am EST

The CME Group's FedWatch tool shows a 50% probability for each of two potential outcomes at the Federal Reserve's 18 September 2024 meeting:

  • A target rate decrease to 475–500 basis points (bps).

  • A target rate decrease to 500–525 bps.

This reflects market uncertainty about whether the Fed will cut rates by 25 or 50 basis points. A week ago, the probability of a 500–525 bps rate was higher (70%), while a month ago, the split was 64% for 500–525 bps and 36% for 475–500 bps. Market expectations have since shifted to an even split between the two potential outcomes.

PPI Index rose slightly by 0.2% in August

09/12/2024 08:30 pm EST

In August, the Producer Price Index (PPI) for final demand increased by 0.2% on a seasonally adjusted basis, following no change in July and a 0.2% rise in June. On an unadjusted basis, the index for final demand rose by 1.7% over the past 12 months. The increase in August was largely driven by a 0.4% rise in prices for final demand services, while prices for final demand goods remained unchanged. Excluding foods, energy, and trade services, the index for final demand rose by 0.3% in August, matching the July increase, and was up 3.3% for the 12 months ending in August.

Initial jobless claim rose by 2,000 and the previous week’s number corrected with an increase of 1,000

09/12/2024 08:00 pm EST

In the week ending September 7, initial claims for seasonally adjusted unemployment insurance rose by 2,000 to 230,000, following a revision of the previous week's figure from 227,000 to 228,000. The four-week moving average increased by 500 to 230,750. The seasonally adjusted insured unemployment rate remained unchanged at 1.2% for the week ending August 31. The number of insured unemployed individuals increased by 5,000 to 1,850,000, with the prior week's figure revised upward by 7,000 to 1,845,000. The four-week moving average of insured unemployment fell by 2,250 to 1,852,500, with the previous average revised upward by 1,750 to 1,854,750.

CPI Report shows annual CPI rose by 2.5%, lowest since February 2021

09/11/2024 08:00 pm EST

In August, the Consumer Price Index for All Urban Consumers (CPI-U) increased by 0.2% on a seasonally adjusted basis, maintaining the same pace as in July. Over the past 12 months, the CPI-U rose by 2.5%, marking the smallest annual increase since February 2021. Shelter costs, which rose by 0.5%, were the primary driver of the overall increase. Food prices saw a modest 0.1% rise, with food away from home up 0.3%, while food at home remained unchanged. Energy prices, however, fell by 0.8%, following a flat reading in the previous month. Excluding food and energy, core inflation increased by 0.3%, reflecting higher costs in shelter, airline fares, motor vehicle insurance, education, and apparel. Over the past year, the overall CPI increased by 2.5%, core inflation rose by 3.2%, the energy index fell by 4.0%, and the food index increased by 2.1%.

Median Sales Price of Houses Decreased to $412,300 compared to $440,000 in 2023

09/10/2024 08:00 pm EST

The median sales price of houses in the U.S. reached $412,300 in Q2 2024, reflecting a slight decline from its peak of over $440,000 in late 2022 to early 2023. This follows a decade-long trend of significant price growth, with prices rising from around $280,000 in 2014, driven by strong demand, limited supply, and low interest rates, particularly during the pandemic. However, the recent decrease suggests a cooling in the housing market, likely influenced by higher mortgage rates and reduced affordability in 2023 and 2024.

Source: Federal Reserve Bank St. Louis

Yield Curve Further Un-inverts to 0.06% after Friday’s Job Report

09/06/2024 11:00 am EST

Observing the 10 year and 2 year spread un-inverted to 0.06% on 2024-09-06

  1. Current Status:

    • The spread between the 10-year and 2-year Treasury yields is 0.06% (6 basis points), indicating that the yield curve has recently un-inverted or is very close to becoming flat.

  2. Historical Context:

    • The yield curve has been inverted for much of 2023 and early 2024, where the 2-year Treasury yield was higher than the 10-year yield (negative spread). Historically, such inversions have preceded U.S. recessions, as shown by the shaded recession periods on the graph.

    • The inversion during this period is one of the deepest on record, similar to past recessions, such as those in the early 1980s, 2000s, and the 2008 financial crisis.

  3. Recent Shift:

    • The positive value of 0.06% suggests that the yield curve is moving toward un-inversion, with the 10-year yield slightly exceeding the 2-year yield. While the inversion might be ending, the yield curve still signals that the market is cautious about future economic growth.

The yield curve has been in a prolonged inversion, but the recent data indicates it is close to un-inverting or becoming flat. This shift may imply that market expectations are adjusting, potentially anticipating a more stable economic outlook or reduced recession risk. However, the inversion’s depth over the past months suggests the possibility of lingering economic uncertainties.

CME FedWatch Tool predicting a 57% of 25 basis point cut and 43% of 50 basis point cut on 9/18

09/06/2024 10:35 am EST

The CME FedWatch Tool shows that for the September 18, 2024, Federal Reserve meeting, there is a 57% probability of a moderate rate cut to 500-525 basis points and a 43% probability of a larger rate cut to 475-500 basis points. Over the past month, the likelihood of a larger rate cut has decreased, as the 1-month probability for the 475-500 bps range has dropped from 68% to 43%, while the probability for the 500-525 bps range has increased from 32% to 57%. This indicates market expectations of a more cautious rate adjustment.

Bureau of Labor Statistics show increase of 142,000 nonfarm payroll with large downward revision in July and June. Unemployment at 4.2% compared to July’s 4.3%.

09/06/2024 10:30 am EST

The latest U.S. employment report from the Bureau of Labor Statistics shows a modest increase of 142,000 nonfarm payroll jobs in August, missing market’s expectation of 160,000, while the unemployment rate remained relatively steady at 4.2% compared to July’s 4.3%. Job gains were seen particularly in the construction and healthcare sectors, signaling growth in these industries.

However, revisions to previous months' data revealed a weaker overall trend. The June nonfarm payroll employment figure was revised down significantly by 61,000 jobs, from 179,000 to 118,000. Similarly, July's figure was adjusted downward by 25,000 jobs, reducing it to 89,000. These revisions indicate that employment gains for the two months were 86,000 lower than initially reported, suggesting that the labor market might be cooling more than previously thought.

Initial Jobless Claims down slightly from previous week to 227,000 compared to 230,000 estimates. Previous Week Revised up 1,000

09/05/2024 11:00 am EST

The latest jobless claims report indicates a relatively stable labor market with initial jobless claims at 227,000 for the week, slightly better than the estimated 230,000. The prior week's number was slightly revised up from 231,000 to 232,000. Continuing claims, which reflect the number of people already receiving benefits, improved notably to 1.838 million from a forecast of 1.865 million, with the four-week moving average also declining.

Regionally, New York, Michigan, Georgia, North Dakota, and Massachusetts reported the largest increases in initial claims. Conversely, significant decreases were observed in Texas, Florida, California, Washington, and Virginia.

August Services PMI at 51.5%, but trend showing economy moving towards contraction

09/05/2024 10:30 am EST

The Services Purchasing Managers' Index (PMI) for August registered at 51.5 percent, showing a slight increase of 0.1 percentage points from July's reading of 51.4 percent. This index measures the economic activity in the service sector, where a PMI above 50 indicates expansion, and below 50 denotes contraction. The August figure suggests that the services sector continues to grow, albeit at a modest pace, contributing positively to the overall economic landscape. This marks the second consecutive month of expansion, as reflected by the index maintaining above the 50 percent threshold, which signals ongoing economic growth in the services domain.

ADP Job Openings added 99,000 Jobs, Far Lower than Expectation Of 140,000

09/05/2024 10:30 am EST

August's job market showed a marked slowdown, with employers adding only 99,000 jobs, significantly lower than the anticipated 140,000, according to private payroll firm ADP. This growth, primarily in construction, education, and health sectors, was substantially supported by larger firms with 250 or more employees. In contrast, professional services and manufacturing sectors experienced declines, marking the weakest performance since 2021.

July Services PMI at 51.4%, but trend showing economy moving towards contraction

09/04/2024 10:30 am EST

The Services PMI® reading of 51.4% in July, while indicating expansion, is indeed close to the contraction threshold of 50%. This suggests that although the services sector is growing, the pace of expansion is relatively modest.

  • Near-Contraction Levels: At 51.4%, the PMI is just 1.4 percentage points above the threshold that signals contraction, meaning the sector is hovering near stagnation.

  • Weak Growth: While the sector is expanding, the growth is not particularly robust. A small decline could push the index back into contraction territory, as was the case in June when it dipped below 50% to 48.8%.

  • Economic Sensitivity: The services sector's performance can be sensitive to broader economic factors like inflation, interest rates, and consumer demand. If these pressures persist or intensify, the sector could face challenges in maintaining growth.

Therefore, while the services sector avoided contraction in July, its proximity to the 50% mark highlights lingering vulnerabilities.

JOLTS Report Showing 7.673 million job openings, compared to 8.090 million expectation

09/04/2024 10:00 am EST

The U.S. July JOLTS (Job Openings and Labor Turnover Survey) report revealed that job openings fell to 7.673 million, missing the market expectation of 8.090 million and down from the revised previous figure of 7.910 million. This marks the lowest level of job openings since February 2021, signaling a potential cooling in the labor market.

  • July 2024 Job Openings: 7.673 million, below expectations.

  • Previous Month (June 2024) Job Openings: Revised down to 7.910 million.

  • Market Expectation: 8.090 million.

  • Lowest Since February 2021: Reflects a significant decline, suggesting reduced demand for labor.

The drop in job openings may indicate that employers are becoming more cautious in their hiring, likely due to a combination of higher interest rates, uncertainty in economic growth, and inflationary pressures. This could also point to a shift in the balance between labor demand and supply, which may relieve some of the tightness in the labor market and could ease wage growth pressures, a key concern for the Federal Reserve in its inflation management strategy.

Lower job openings might also suggest a moderation in overall economic activity, though other labor market indicators, such as unemployment and job creation, will need to be considered to get a fuller picture of the employment landscape.

ISM Manufacturing PMI rose slightly to 47.2, but still indicating contraction in manufacturing sector

09/03/2024 10:30 am EST

The ISM Manufacturing PMI for August 2024 showed a slight increase to 47.2, up from 46.8 in July 2023, but still indicating a contraction in the manufacturing sector as it remained below the 50 threshold. This marks the 21st monthly contraction out of the last 22 months, signaling ongoing challenges for US manufacturing.

  • New Orders: Dropped to 44.6 from 47.4, marking the third consecutive monthly decline, reflecting weaker demand.

  • Production: Fell further to 44.8 from 45.9, showing an acceleration in the decline of manufacturing output.

  • Backlog of Orders: Continued to deplete, although at a slower pace, with the index rising slightly to 43.6 from 41.7.

  • Employment: Decreased for the third month in a row, but the rate of decline slowed, with the employment index rising to 46 from 43.4.

  • Prices: Surged unexpectedly to 54 from 52.9, defying market expectations of a slowdown to 52.5. This increase in costs could pose challenges for the Federal Reserve's goal of achieving disinflation.

The continued contraction in the manufacturing sector reflects the ongoing impact of high interest rates set by the Federal Reserve, which are intended to curb inflation but are also dampening demand and production in manufacturing. The decline in new orders and production highlights weak demand, while rising prices could complicate the Federal Reserve's efforts to manage inflation without further damaging the economy. The data underscores the challenges facing the US manufacturing sector in the current economic climate.

Yield Curve Un-inverts to 0% due to bull-steepener, indicating probability of recession

09/02/2024 11:00 am EST

The yield curve spread between the 10-year and 2-year U.S. Treasury bonds is a key economic indicator, with a negative spread (inversion) historically predicting recessions. The graph shows that the yield curve was recently inverted in 2022-2023, indicating market fears of a potential recession. As of August 30, 2024, the spread has returned to 0%, suggesting a possible stabilization in economic expectations. This shift might indicate that the market anticipates either economic recovery or a forthcoming reduction in short-term interest rates by the Federal Reserve. However, despite this normalization, the risk of a recession remains, and it’s crucial to monitor other economic indicators to confirm the economic outlook.

July 2024 Annual PCE Inflation at 2.5%, moving towards Fed’s target

08/30/2024 11:00 am EST

Overall Inflation: The overall PCE-equivalent inflation rate for the 12-month period is 2.5%. Monthly inflation is currently at 1.9%, suggesting a recent uptick.

  1. Core Inflation: Core inflation, which excludes volatile items like food and energy, is also at 2.6% for the year, with a slight increase to 2.0% in the most recent month.

  2. Adjusted Categories:

    • Core excluding Housing: Shows slightly lower annual inflation at 2.3%, with a smaller uptick to 1.6% for the month.

    • Core excluding Housing and Used Cars: Similarly, this category shows a 12-month rate of 2.3%.

    • Core Services excluding Housing: This category is adjusted significantly for PCE-equivalent rates, showing a 12-month rate of 2.5% but with a notable -0.8 adjustment factor, indicating specific exclusions or adjustments applied.

  3. Other Measures:

    • Market Core and Median Inflation: Both stand at 2.5% and 2.7% respectively for the 12-month period, with the median measure slightly higher, indicating that the median inflation rate across various categories tends to be somewhat more elevated than the average.

  4. Trimmed Mean: This method, which cuts off extreme values in data to provide a more stable central tendency measure, shows an inflation rate of 2.7% annually.

This structured overview of PCE-equivalent inflation rates helps to understand the nuanced changes in price levels across different consumer sectors, and is particularly useful for monetary policy considerations, indicating ongoing adjustments in consumer prices but at a controlled pace.

US GDP Revision upwards to 3.0% due to increased consumer spending and non residential investments but seeing personal savings with significant decrease

08/29/2024 11:00 am EST

The U.S. Bureau of Economic Analysis revised its second quarter GDP growth rate up to 3.0% from the 2.8% advance estimate, based on more complete data which highlighted a notable upturn in consumer spending. This marked an acceleration from the 1.4% growth seen in the first quarter of 2024. The increase in GDP was primarily driven by robust consumer spending, significant investments in private inventory, and growth in nonresidential fixed investment, despite an increase in imports which subtract from GDP calculations.

Current-dollar GDP rose to $28.65 trillion, reflecting a substantial increase of 5.5% on an annual basis. This revision also adjusted the price index for gross domestic purchases slightly upwards by 0.1 percentage points to 2.4%. Meanwhile, the personal consumption expenditures (PCE) price index saw a minor downward revision to 2.5%. The report also highlighted changes in personal income, with a notable increase in compensation and personal transfer receipts, although there were slight downward revisions from initial estimates.

Personal savings also saw a revision, decreasing to $686.4 billion, leading to a saving rate of 3.3%, slightly lower than previously estimated. On the corporate front, profits rebounded with a $57.6 billion increase in the second quarter, contrasting with a decline in the previous quarter. This recovery in profits spanned both financial and nonfinancial sectors, though global profits saw a decrease due to lower receipts and higher payments. The report suggests a balanced view of economic activity with a steady rise in GDP complemented by a recovery in corporate profits, setting a cautiously optimistic tone for economic policies and potential rate adjustments by the Federal Reserve.

Initial Jobless Claims and Continuous Jobless Claims closely aligned with expectation

08/29/2024 10:00 am EST

The latest data on U.S. jobless claims for the week ending August 24, 2024, shows initial claims at 231,000, slightly above the expected 230,000 and down from the previous week's figure, which was revised up to 233,000. Continuing claims were at 1,868,000, closely aligning with expectations of 1,870,000 and showing a slight increase from the previous week's revised figure of 1,855,000.

This data aligns with the Non-Farm Payroll (NFP) survey week, suggesting that the labor market remains robust at the moment but with risks of large future revisions.

Initial Jobless Claims Rise More Than Expected, Indicating Possible Slow Down Of Economy

08/22/2024 10:00 am EST

Initial Jobless Claims:

  • Totaled 232,000 for the week ending August 17.

  • Increased from an upwardly revised 228,000 in the previous week.

  • Higher than the expected figure of 230,000.

  1. Four-Week Moving Average:

    • Slightly decreased by 500 claims to 236,000.

    • This metric helps smooth out weekly fluctuations.

  2. Continuing Claims:

    • Inched up to 1.863 million from a downwardly revised 1.859 million.

    • This was lower than the forecasted increase to 1.870 million.

  3. State-Level Highlights:

    • Florida saw the highest increase in claims with 1,987 new filings.

    • California followed with an increase of 1,355 claims.

    • Significant decreases in claims were observed in Michigan (-2,783), Texas (-2,077), and Georgia (-1,181).

Bureau of Labor Statistics adjusted March 2024’s employment gains down by 818,000 jobs

08/21/2024 10:00 am EST

The U.S. economy saw a significant downward revision in job growth figures for the past year, which may solidify expectations for an upcoming Federal Reserve rate cut. The Bureau of Labor Statistics adjusted March 2024’s employment gains down by 818,000 jobs as part of its annual payroll data review. This revision indicates a monthly decrease of about 68,000 jobs from previously reported figures. Financial analysts from ING suggest that these revised job numbers, amid converging inflation rates towards the target, heighten recession fears and could trigger financial market instability, reminiscent of recent market disruptions linked to payroll disappointments. Conversely, Goldman Sachs advises caution, pointing out that the primary source of the benchmark revision, the Quarterly Census of Employment and Wages (QCEW), may not fully account for unauthorized immigrants who have significantly contributed to employment growth. Additionally, historical data shows that the QCEW has often been revised upwards, suggesting that initial benchmarks might understate actual employment gains. Market expectations lean towards a Fed rate cut, with significant bets placed on both a 25 and a 50 basis point reduction next month.

US Leading Economic Indicator decreased more than expected

08/19/2024 10:00 am EST

The Conference Board reported a significant downturn in the U.S. Leading Economic Index (LEI) for July, which decreased by 0.6%, exceeding the expected 0.3% decline and following a 0.2% drop in June. Over the six-month period ending in July 2024, the LEI decreased by 2.1%, which is a slower decline compared to the 3.1% drop observed in the previous six months. Despite the ongoing monthly decreases, the LEI's six-month annual growth rate no longer points to an impending recession. The primary contributors to July's decline were significant weaknesses in non-financial components such as new orders, consumer expectations, building permits, and manufacturing hours, coupled with a persistently negative yield spread. Additionally, the coincident economic index remained steady in July, following a 0.2% increase in June, showing a 0.9% growth in the first half of 2024, an improvement over the prior six months. However, the lagging economic index slightly decreased by 0.1% in July, with its six-month growth rate slowing down significantly. This overall data indicates potential economic challenges ahead, with projected slow growth in U.S. real GDP, anticipated at 0.6% in Q3 and 1% in Q4 of 2024.

Initial jobless claim in July fell slightly, indicating job market continues to hold on

08/15/2024 10:00 am EST

In the week ending August 10, the number of initial jobless claims in the U.S. fell by 7,000 to 227,000, from the prior week's revised level of 234,000. The four-week moving average also dropped by 4,500 to 236,500, indicating some stability in the labor market despite recent fluctuations. Additionally, the seasonally adjusted insured unemployment rate remained steady at 1.2 percent for the week ending August 3.

The total number of people receiving benefits, known as the insured unemployment figure, decreased by 7,000 to 1,864,000 for the same week. The four-week moving average of these figures slightly increased by 1,000 to 1,862,000, marking the highest level since late November 2021. These data points reflect ongoing adjustments in the labor market and potential shifts in employment stability.

Consumer Price Index grew by 2.9 percent, lowest since 2021

08/14/2024 10:00 am EST

In July, the Consumer Price Index for All Urban Consumers (CPI-U) rose by 0.2 percent on a seasonally adjusted basis, a slight increase following a 0.1 percent decline in June, as reported by the U.S. Bureau of Labor Statistics. Over the past year, the all items index has seen a 2.9 percent increase before seasonal adjustments.

A significant driver of the monthly all items increase was the shelter index, which went up by 0.4 percent and contributed to nearly 90 percent of the overall rise. The energy index remained stable following declines in the previous two months, while the food index rose by 0.2 percent, mirroring its June increase. Notably, both the indices for food away from home and food at home saw increments of 0.2 percent and 0.1 percent, respectively.

The core inflation measure, which excludes food and energy, also increased by 0.2 percent in July, accelerating slightly from a 0.1 percent rise in June. Increases were observed in several categories including shelter, motor vehicle insurance, household furnishings and operations, education, recreation, and personal care. Conversely, declines were noted in the indexes for used cars and trucks, medical care, airline fares, and apparel.

Year-over-year, the all items index has marked its smallest 12-month rise since March 2021, growing by 2.9 percent. The core index rose by 3.2 percent over the last 12 months, the smallest increase since April 2021. The energy index increased by 1.1 percent and the food index rose by 2.2 percent over the same period, indicating ongoing but moderating inflationary pressures.

US PPI MoM 0.1% vs 0.2% estimate and YoY 2.2% vs 2.3% estimate

08/13/2024 06:00 pm EST

In July, the Producer Price Index (PPI) for wholesale inflation in the U.S. saw a minimal increase of 0.1%, according to the Bureau of Labor Statistics. This rise was below the anticipated 0.2% predicted by economists. The core PPI, which excludes volatile food and energy prices, remained unchanged, while another measure excluding trade services rose by 0.3%. Year-over-year, the headline PPI climbed by 2.2%, a deceleration from June's 2.7%.

This subdued inflation growth, particularly in the core metrics, could encourage the Federal Reserve to consider lowering interest rates. The market responded positively to the report, with stock futures climbing and Treasury yields declining.

Despite the tame overall increase, final demand goods experienced a 0.6% jump, the largest since February, propelled by a 1.9% rise in energy costs and a 2.8% increase in gasoline prices. However, a 0.2% decline in services—marked by significant drops in trade services and wholesaling margins for machinery and vehicles—counterbalanced these gains.

This data suggests easing inflation pressures, aligning with consumer expectations of inflation stabilizing around 2.3% over the next three years—a record low in the 11-year span of a New York Fed survey. The same survey highlighted increased financial strain among lower-income households, with more individuals expecting difficulties in meeting minimum debt payments.

As the Federal Reserve prepares for its September meeting, the decision between a quarter or a half percentage point rate cut remains uncertain, with market futures showing an even split. This comes as Fed officials continue to target a 2% inflation goal, with recent data largely supporting their efforts to curb inflation.

Initial jobless claim dropped to 233,000, previous week revised up to 250,000

4 week moving average insured unemployment highest since 2021

08/08/2024 06:00 pm EST

In the latest report for the week ending August 3, the U.S. saw a significant decrease in initial jobless claims, with seasonally adjusted figures dropping by 17,000 to 233,000 from the previous week's revised level of 250,000. Despite this weekly decrease, the four-week moving average for initial claims rose by 2,500 to 240,750.

The seasonally adjusted insured unemployment rate remained steady at 1.2% for the week ending July 27. However, the number of people receiving benefits increased by 6,000, reaching 1,875,000. This marks the highest level of insured unemployment since November 27, 2021, when it stood at 1,878,000. The four-week moving average for insured unemployment also increased, rising by 7,000 to 1,862,000, which is the highest since the same date in 2021.

These figures suggest a mixed outlook for the U.S. labor market, with a short-term improvement in jobless claims contrasted by an upward trend in the number of people receiving unemployment benefits.

Short end of the yield curve collapsed on August 2nd 2024

08/02/2024 06:00 pm EST

The updated U.S. Treasury Yield Curve data for August 2, 2024, shows significant changes in the yield across different maturities:

Yield Curve Overview

  • The yield curve continues to display an inversion, with short-term yields generally higher than medium- and long-term yields.

Current Yields and Changes

  • Short-term Yields:

    • 1 Month: 5.366%, increased by 0.008 (0.15% change).

    • 2 Months: 5.367%, decreased by 0.011 (-0.20% change).

    • 3 Months: 5.190%, decreased by 0.074 (-1.41% change).

    • 4 Months: 5.207%, decreased by 0.056 (-1.06% change).

    • 6 Months: 4.855%, decreased by 0.196 (-3.88% change).

  • Medium-term Yields:

    • 1 Year: 4.368%, decreased by 0.090 (-2.02% change).

    • 2 Years: 3.874%, decreased by 0.291 (-7.00% change).

    • 3 Years: 3.703%, increased by 0.006 (0.16% change).

    • 5 Years: 3.615%, decreased by 0.231 (-6.01% change).

  • Long-term Yields:

    • 7 Years: 3.672%, decreased by 0.186 (-4.82% change).

    • 10 Years: 3.785%, decreased by 0.191 (-4.80% change).

    • 20 Years: 4.183%, decreased by 0.160 (-3.69% change).

    • 30 Years: 4.109%, decreased by 0.160 (-3.77% change).

Analysis

  • Inversion and Changes:

    • The yield curve remains inverted, with the short-term rates higher than longer-term rates, indicating potential expectations of economic slowdown.

    • Notably, the 2-year yield experienced a significant drop of 7%, reflecting a strong market response to recent economic data, possibly influenced by the labor report.

    • Long-term yields also declined, particularly the 10-year yield, which fell by nearly 5%, highlighting investors' shift towards longer maturities.

  • Market Reactions:

    • The sharp decrease in medium- to long-term yields may reflect increased demand for safer, longer-term securities amid economic uncertainties.

    • Investors might be anticipating that the Federal Reserve could adjust monetary policy in response to slowing job growth and rising unemployment.

Implications

  • Economic Sentiment: The inversion and declines in yields across most maturities suggest heightened concerns about economic growth prospects.

  • Monetary Policy Expectations: The significant changes, especially in the 2-year and 10-year yields, could indicate market expectations for potential future rate cuts by the Federal Reserve to stimulate the economy.

Job growth total at 114,000, unemployment rose to 4.3%

08/02/2024 09:00 am EST

In July, U.S. job growth slowed significantly, with nonfarm payrolls increasing by just 114,000, well below the expected 185,000 and the revised June figure of 179,000. The unemployment rate rose to 4.3%, the highest since October 2021, indicating a weakening labor market. Average hourly earnings grew by 0.2% for the month and 3.6% year-over-year, both below forecasts of 0.3% and 3.7%, respectively. Following the report, stock market futures declined further, and Treasury yields fell as investors reacted to the disappointing job data and potential economic implications.

Yield curve starts to un-invert with bull steepener causing short term yield to fall.

08/01/2024 06:00 pm EST

As of August 2, 2024, the U.S. Treasury Yield Curve is inverted, with short-term yields (such as the 1-month and 3-month) higher than long-term yields (such as the 10-year and 30-year). This inversion often signals market expectations of an economic slowdown or potential recession.

Recent Changes:

  • Short-term Yields: The 3-month yield increased significantly by 1.06%, indicating rising interest rates or heightened demand for short-term securities.

  • Medium and Long-term Yields: Most yields in this range have decreased, suggesting expectations of lower interest rates in the future or reduced inflationary pressures.

Historical Comparison:

  • Compared to a month ago, short-term rates are mostly stable or slightly rising, while longer-term rates have generally decreased.

  • The yield curve's shape and level changes compared to a year ago reflect shifts in economic sentiment and monetary policy over the past year.

Implications:

  • The inverted yield curve suggests market concerns about the economic outlook, possibly reflecting expectations of slowing growth or potential future rate cuts by the Federal Reserve.

  • The demand for longer-term treasuries remains strong, keeping their yields lower despite recent short-term rate hikes.

Initial Jobless Claims increased to 249,000, beating expectation of 235,000

08/01/2024 03:00 pm EST

The U.S. Department of Labor reported that initial unemployment claims rose to 249,000 for the week ending July 27th, an increase of 14,000 from the previous week. The 4-week moving average for initial claims also increased to 238,000, up by 2,500. Continuing claims, or insured unemployment, increased by 33,000 to 1,877,000 for the week ending July 20th, marking the highest level since November 2021. The 4-week moving average for continuing claims rose to 1,857,000. The insured unemployment rate remained steady at 1.2%. These figures suggest a slight weakening in the labor market, with both initial and continuing claims experiencing increases.

ADP Job Report added only 122,000 jobs in June 2024, lower than expectation of 150,000

07/31/2024 03:00 pm EST

The July ADP® National Employment Report™ indicates a rise of 122,000 jobs in private sector employment for the month. Additionally, annual pay has increased by 4.8 percent year-over-year. This report, generated by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab, leverages anonymized payroll data from over 25 million U.S. employees to provide an independent and high-frequency analysis of the private-sector labor market.

Key highlights from the report include:

  • Employment Change: The report provides insights into the total private employment change for the current month, supported by weekly job data from the preceding month.

  • Data Source: The data is derived from ADP's anonymized and aggregated payroll information, offering a near real-time measure of U.S. employment. This measure is based on the number of employees on ADP client payrolls, giving a detailed view of the labor market dynamics.

  • Pay Insights: The pay measure captures earnings data from a cohort of almost 10 million employees over a 12-month period, providing a unique perspective on wage growth trends.

Initial Jobless Claims climbed to 235,000, labor market shows resistance and continues to hold on

07/25/2024 03:00 pm EST

The latest figures on U.S. jobless claims indicate a slight improvement in the labor market. Initial jobless claims have decreased to 235,000, slightly better than the expected 238,000 and down from the previous 243,000. This reduction suggests that fewer people are filing for unemployment benefits, indicating ongoing stability in job retention.

Continuing claims also show a positive trend, registering at 1,851,000, which is below the expected 1,860,000 and a decrease from the prior week's 1,867,000. This reduction in continuing claims further supports the view that more individuals are remaining employed or possibly returning to work.

Overall, these figures hint at a resilient labor market, which could influence Federal Reserve policy decisions regarding interest rates as they balance economic growth with inflation control.

Initial Jobless Claims climbed to 243,000, showing potential softening in the labor market

07/18/2024 03:00 pm EST

The recent jobless claims report shows an unexpected rise, with initial claims reaching 243,000, surpassing estimates and marking the highest level since August of the previous year. This uptick, accompanied by an increase in continuing claims to 1.867 million, suggests potential softening in the labor market, highlighting six consecutive weeks where claims have remained above 1.800 million, the highest since November 2021.

This shift comes during a critical survey week for the Bureau of Labor Statistics (BLS) employment report, set to be released next month, and follows a period less affected by seasonal adjustments due to the July 4th holiday, providing a clearer view of employment trends. The data points to a possible weakening in employment conditions, which could influence the Federal Reserve's monetary policy decisions.

In the financial markets, U.S. Treasury yields are slightly up, with the 2-year yield at 4.435% and the 10-year yield at 4.167%. The stock market is showing mixed reactions, with the Dow Jones Industrial Average down by 71 points, while the S&P 500 is up by 13.48 points, and the NASDAQ has gained 120 points.

Amidst these developments, former vice chairman of the Federal Reserve Roger Ferguson suggested on CNBC that a rate cut in September is likely, reflecting a shift from his previous hawkish stance. This aligns with comments from Fed Chairman Jerome Powell and other Fed officials who have emphasized the importance of balancing the dual mandate of controlling inflation and supporting employment. The potential for weakening employment may prompt the Fed to consider earlier or more aggressive rate cuts, especially with the next Federal Open Market Committee (FOMC) meeting scheduled for late July and another not until mid-September, raising questions about the timing of monetary policy adjustments.

Yield curve flattened and un-inverting with ‘bull steepener’ happens in 2-year and 3-year treasury yield

07/15/2024 03:00 pm EST

The occurrence of a "bull steepener" in the yield curve on July 16, 2024, where shorter-term interest rates fall relative to longer-term rates, typically indicates increasing optimism about economic prospects in the longer term, or expectations of monetary easing by the Federal Reserve. This can be seen as a response to lower expected short-term risks or an anticipation of lower interest rates in the near term, which can stimulate economic growth or counteract potential economic slowdowns.

In this scenario, where short-term rates drop more significantly than long-term rates, the market might be predicting that the Federal Reserve will cut rates to combat a perceived risk of recession or to provide economic stimulus. This type of yield curve movement is closely watched by investors as it often precedes changes in monetary policy aimed at managing economic growth and inflation.

The expectation of Federal Reserve rate cuts, as suggested by the strengthening of the bull steepener, implies that the market senses economic headwinds that may require stimulative measures to ensure sustained economic activity. Investors might thus position themselves for lower future interest rates, which can affect everything from bond prices to mortgage rates and broader financial conditions.

The Fed Fund Rates usually follow the 2 Year Treasury Yield, if the 2 year treasury yield falls more than expected in recent weeks, we are possible to see a rate cut in July 2024.

Michigan Consumer Sentiment Index fell to 66.0

07/12/2024 03:00 pm EST

In July, the Michigan Consumer Sentiment Index fell to 66.0, marking an eight-month low and a 2.2 point decrease from June, which was also below the anticipated 68.5. Joanne Hsu, the director of the surveys, noted that while the index has rebounded 30% from its June 2022 low, consumer sentiment remains muted due to ongoing concerns about high prices despite expectations of moderating inflation.

The report highlighted that year-ahead inflation expectations decreased to 2.9%, aligning with levels seen prior to the pandemic, and long-run expectations also slightly decreased to 2.9%. These figures suggest consumers are anticipating stable yet somewhat elevated inflation rates compared to pre-pandemic levels.

This month's sentiment index is notably lower than the start of six previous recessions, indicating potential concerns about the economic outlook. Additionally, the report compared this index with other sentiment measures like the Conference Board's Consumer Confidence Index and the NFIB Business Optimism Index, noting similar trends across these indicators.

The next update for this index will be released on July 26th, providing further insights into consumer attitudes and economic expectations.

PPI Month over Month Change Increased 0.2 percent in June 2024. Year over Year increase 2.6%.

07/12/2024 10:00 am EST

The Producer Price Index (PPI) for final demand in the U.S. increased by 0.2 percent in June 2024, as reported by the U.S. Bureau of Labor Statistics. This follows a stagnant movement in May and a rise of 0.5 percent in April. Over the past 12 months, the index for final demand on an unadjusted basis rose by 2.6 percent, marking the largest year-over-year increase since March 2023. The increase in PPI showing sellers’ lose of pricing power on the consumers.

Key Highlights:

  • Services: The increase in final demand prices in June was primarily driven by a 0.6 percent rise in final demand services, notably due to a 1.9 percent increase in margins for final demand trade services. This category predominantly reflects changes in the margins received by wholesalers and retailers.

  • Goods: The index for final demand goods, however, decreased by 0.5 percent, following a 0.8 percent drop in May. This decrease was largely due to a 2.6 percent fall in the index for final demand energy.

Detailed Breakdown:

  • Services Details: Significant contributors to the rise in service prices included a 3.7 percent increase in margins for machinery and vehicle wholesaling. Other areas showing increases were automobile parts retailing and fuels and lubricants retailing, among others. However, there was a notable 1.2 percent decrease in prices for truck transportation of freight.

  • Goods Details: The decrease in goods prices was led by a 5.8 percent decline in gasoline prices. Prices also fell for processed poultry, residential electric power, diesel fuel, jet fuel, and fresh and dry vegetables. Conversely, there was a significant 55.4 percent increase in the price of chicken eggs, and prices for residential natural gas and aluminum base scrap also rose.

Core PPI:

  • The index for final demand less foods, energy, and trade services was unchanged in June, following a 0.2 percent increase in May. Over the past 12 months, this core index has risen by 3.1 percent.

The data indicates a mixed scenario where service-related sectors are experiencing price increases while goods, especially energy, are seeing price declines. This divergence reflects varying dynamics in different sectors of the economy, influencing overall producer prices.

CPI Month over Month Change Decreased 0.1 percent. Year over Year increase 3.0%.

07/11/2024 10:00 am EST

In June 2024, the Consumer Price Index for All Urban Consumers (CPI-U) experienced a slight decrease of 0.1 percent, seasonally adjusted, marking a shift from the unchanged status in May, as reported by the U.S. Bureau of Labor Statistics. Over the past 12 months, the CPI-U saw an increase of 3.0 percent before seasonal adjustments.

Key movements in the June CPI included:

  • A significant decline in the gasoline index by 3.8 percent, continuing from a 3.6 percent drop in May, which contributed heavily to the overall decrease in the CPI.

  • The energy index also fell by 2.0 percent, matching its decline from the previous month.

  • In contrast, the food index rose slightly by 0.2 percent. Specifically, food away from home increased by 0.4 percent, and food at home saw a modest rise of 0.1 percent.

Other notable changes in the index included:

  • The core CPI, which excludes food and energy, increased by 0.1 percent in June, a deceleration from the 0.2 percent rise seen in May.

  • Increases were observed in indexes for shelter, motor vehicle insurance, household furnishings and operations, medical care, and personal care.

  • Decreases occurred in airline fares, used cars and trucks, and communication.

Looking at annual changes:

  • The all items index's year-over-year growth rate decreased to 3.0 percent from 3.3 percent in May.

  • The core inflation index (all items less food and energy) rose 3.3 percent over the last 12 months, marking the smallest increase since April 2021.

  • The energy index went up by 1.0 percent, while the food index grew by 2.2 percent over the same period.

These figures suggest a mixed inflation landscape where declines in energy prices significantly impacted the overall inflation rate, while selected categories like food and core items continued to see rises.

Initial jobless claims climbed to 222,000. Continuous jobless claims rose to 1.845 million.

07/11/2024 09:00 am EST

In the week ending July 6, the U.S. saw a significant drop in initial jobless claims, with the advance figure for seasonally adjusted initial claims decreasing by 17,000 to 222,000, compared to the previous week's revised level of 239,000. This reduction brings the four-week moving average down by 5,250 to 233,500.

Despite the decrease in initial claims, the advance seasonally adjusted insured unemployment rate remained steady at 1.2% for the week ending June 29. The number of insured unemployed during the same week slightly decreased by 4,000, resulting in a total of 1,852,000. However, the four-week moving average of insured unemployment increased by 9,750, reaching 1,840,250, the highest since December 4, 2021.

These fluctuations in jobless claims and insured unemployment figures indicate ongoing changes in the labor market, potentially reflecting shifts in economic conditions or seasonal employment patterns.

SAHM Rule triggered as 3 month average reached 4.0% with 0.5% increase from past 12-month lowest rate of 3.5%

07/06/2024 10:00 am EST

The recent data release from the U.S. Bureau of Labor Statistics showed a slight increase in the unemployment rate to 4.1% in June 2024, rising by 0.1 percentage point above the forecasted rate. This rate captures the portion of the civilian labor force that is actively seeking employment.

The increase in the unemployment rate has triggered the Sahm Rule, a real-time recession indicator developed by former Fed economist Claudia Sahm. The rule states that a recession is likely if the three-month moving average of the national unemployment rate rises by 0.50 percentage points or more relative to its lowest point in the previous 12 months. Given that the lowest rate within the last year was 3.5%, and the current three-month average is 4.0%, the criteria for the Sahm Rule have been met, suggesting the onset of a recession.

This uptick in unemployment, despite being small, has significant implications. It might partly reflect an increase in the labor force which, if not matched by job creation, raises the unemployment rate. The recent rise in initial jobless claims and a consecutive increase in continuing claims corroborate this recession signal.

The graph below shows the past year’s unemployment rate, for the most recent three months, the unemployment rates are: 3.9% (April 2024), 4.0% (May 2024), 4.1% (June 2024), with an averaged 3 months unemployment rate of 4.0%. Compared to the lowest point of the past 12 months which is 3.5% (July 2023), the SAHM Rule has been triggered.

US Unemployment Rate rose to 4.1%, a 3 month consecutive increase. Job numbers revised down in April and May.

07/05/2024 10:00 am EST

U.S. job growth experienced a slowdown in June, with employers adding 206,000 jobs, slightly above the 200,000 anticipated by economists but down from previous months. The unemployment rate also increased unexpectedly from 4.0% in May to 4.1% in June, according to the latest data from the Bureau of Labor Statistics.

Additionally, job numbers for April and May were revised downward. April's figures were reduced by 57,000 to 108,000 jobs, and May's numbers were cut by 54,000 to 218,000 jobs. Despite these adjustments, average hourly wages in June grew by 0.3% from the previous month and were up 3.9% year-over-year, aligning with economist expectations.

The release of the job figures led to a decrease in Treasury yields as the market digested the implications for future Federal Reserve actions regarding interest rates. With inflation showing signs of easing, Fed officials have indicated a shift in focus towards labor market conditions, which could prompt earlier or deeper rate cuts depending on emerging economic data.

This report is particularly significant for the Federal Reserve as it assesses the timing for potential adjustments to its benchmark interest rate, considering both employment trends and broader economic indicators.

Bitcoin under $56,000 after July 4th Selloff

07/05/2024 08:00 am EST

Bitcoin has experienced a significant crash, dropping toward $60,000 and wiping out $200 billion from the overall crypto market, including major cryptocurrencies like Ethereum, XRP, and Solana. This decline, which has seen Bitcoin fall almost 15% over the past month, is attributed to fears of a "true correction" and recent comments from Federal Reserve Chair Jerome Powell.

Powell warned of a "critical period" for the Federal Reserve, highlighting that current deficit levels are "unsustainable." His comments have caused concern among traders and investors, who are closely monitoring the Fed's stance on interest rates and economic policies.

The crash has pushed Bitcoin below significant technical and psychological levels at $60,000.

The Federal Reserve recently left interest rates unchanged but signaled the possibility of a rate cut in 2024. This comes after a series of rapid rate hikes following the COVID-19 pandemic, which were intended to combat inflation spurred by extensive stimulus spending. Investors are now looking to upcoming economic data, such as the Fed's June meeting minutes and the jobs report, to gauge the likelihood of future rate cuts.

BlackRock analysts have also issued a warning, stating that central banks may need to keep interest rates higher than pre-pandemic levels to address persistent inflationary pressures. This environment could pose additional challenges for Bitcoin and the broader crypto market.

Despite the recent downturn, Bitcoin remains up over 38% year-to-date, bolstered earlier in the year by the launch of Bitcoin spot ETFs, which contributed to a record high of over $70,000. However, the current market conditions and economic uncertainties have triggered a cautious outlook among investors and analysts.

ISM Services Index fell to 48.8% in June vs 53.8% in May

07/03/2024 11:00 am EST

The U.S. economy shows signs of weakening as the ISM services index, which tracks service-oriented sectors like restaurants and retail, fell to 48.8% in June from 53.8% in May. This marks the lowest reading since 2020 and indicates a contraction in these sectors for the second time in three months. The decrease suggests that Americans are reducing their spending on services such as dining out, contributing to a slowdown in economic growth. This development reflects broader economic challenges as these sectors are significant contributors to the U.S. economy.

ADP Employment Data shows private companies added 150,000 jobs in June, less than expectation of 160,000

07/03/2024 09:00 am EST

In June, private companies in the U.S. added 150,000 jobs, falling short of both the previous month's revised figure of 157,000 and the Dow Jones estimate of 160,000, according to ADP. This marks the lowest monthly increase since January, signaling a potential slowdown in the labor market. Leisure and hospitality led the sectors with 63,000 new jobs, significantly bolstering the overall numbers.

Apart from leisure and hospitality, other sectors like construction and professional and business services also saw gains, adding 27,000 and 25,000 jobs respectively. However, the manufacturing sector shed 5,000 jobs, and natural resources and mining saw a decrease of 8,000 jobs.

Wage growth for existing job holders decelerated to a 4.9% year-over-year increase, the smallest rise since August 2021, indicating a slowdown in wage inflation. Meanwhile, those who switched jobs experienced a 7.7% wage increase, though this rate has also been decreasing.

Most of the job gains were concentrated in mid-sized companies (50-499 employees), which added 88,000 jobs. Geographically, the South accounted for over half of the new jobs with 80,000 additions.

ADP’s findings serve as a precursor to the more comprehensive non-farm payrolls report from the Labor Department, expected to show a 200,000 job increase. Historically, there has been a discrepancy between ADP's and the Labor Department's figures, with ADP often reporting lower numbers.

Initial jobless claims climbed to 238,000 vs 235,000 expected. Contiuous jobless claims rose to 1.858 million

07/03/2024 09:00 am EST

U.S. initial jobless claims for the week rose to 238,000, exceeding the estimated 235,000, and marking an increase from the previous week's revised figure of 234,000. The 4-week moving average for initial claims also increased to 238,500 from last week's 236,250, indicating a slight upward trend in new unemployment filings.

Continuing jobless claims, which represent the number of people already receiving benefits, rose to 1.858 million, surpassing the forecast of 1.840 million. This figure was up from the previous week's revised number of 1.832 million. Moreover, the 4-week moving average for continuing claims increased to 1.831 million from 1.814 million, reaching the highest level since December 4, 2021.

These figures suggest a modest uptick in layoffs and a stabilization at a higher level of ongoing jobless claims, reflecting some softening in the labor market conditions.

Job Openings and Turnover Labor Summary - job openings increased in state and local government and decreased in food services

07/02/2024 12:00 pm EST

The number of job openings changed little at 8.1 million on the last business day of May, the U.S. Bureau of Labor Statistics reported today. Over the month, both the number of hires and total separations were little changed at 5.8 million and 5.4 million, respectively. Within separations, quits (3.5 million) and layoffs and discharges (1.7 million) changed little. This release includes estimates of the number and rate of job openings, hires, and separations for the total nonfarm sector, by industry, and by establishment size class. Job Openings On the last business day of May, the number of job openings changed little at 8.1 million. This measure was down by 1.2 million over the year. The job openings rate was little changed at 4.9 percent in May. Job openings decreased in accommodation and food services (-147,000) and in private educational services (-34,000). The number of job openings increased in state and local government, excluding education (+117,000), durable goods manufacturing (+97,000), and federal government (+37,000). Hires In May, the number of hires was little changed at 5.8 million. Over the year, hires were down by 415,000. The hires rate was little changed at 3.6 percent in May. Separations Total separations include quits, layoffs and discharges, and other separations. Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. Other separations include separations due to retirement, death, disability, and transfers to other locations of the same firm. The number of total separations in May changed little at 5.4 million. This measure was down by 424,000 over the year. The total separations rate remained unchanged at 3.4 percent in May. In May, the number of quits was little changed at 3.5 million. Over the year, quits were down by 550,000. The quits rate was 2.2 percent in May, the seventh month in a row. In May, the number of layoffs and discharges changed little at 1.7 million, and the rate remained unchanged at 1.0 percent. The number of other separations was little changed in May at 309,000. Establishment Size Class In May, for establishments with 1 to 9 employees, the job openings rate, hires rate, and total separations rate changed little. For establishments with 5,000 or more employees, the layoffs and discharges rate increased while the job openings rate, hires rate, and total separations rate changed little. April 2024 Revisions The number of job openings for April was revised down by 140,000 to 7.9 million, the number of hires was revised down by 25,000 to 5.6 million, and the number of total separations was revised down by 35,000 to 5.3 million. Within separations, the number of quits was revised down by 55,000 to 3.5 million and the number of layoffs and discharges was revised up by 27,000 to 1.5 million. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.)

Construction Spending decreased 0.1% in May 2024, with major decrease in private construction

07/01/2024 06:00 pm EST

In May 2024, U.S. construction spending slightly declined by 0.1% to $2,139.8 billion from April’s revised figure of $2,142.1 billion, failing to meet the expectations of a 0.2% increase. Despite this month-to-month decrease, there was a notable year-over-year improvement, with spending rising 6.4% compared to May 2023's total of $2,011.8 billion.

Analyzing the first five months of 2024, construction spending totaled $836.3 billion, marking an 8.8% increase from the $768.6 billion recorded during the same period in 2023. This suggests a robust growth in construction activity overall for the year, despite the slight monthly downturn.

Private Construction Breakdown:

  • Total private construction spending decreased to $1,652.1 billion, down by 0.3% from April's revised amount of $1,656.7 billion.

  • Residential construction also saw a reduction, falling 0.2% to $918.2 billion from April’s $920.3 billion.

  • Nonresidential construction spending dipped by 0.3% to $733.9 billion from $736.5 billion in April.

Public Construction Insights:

  • Contrasting the trend in private construction, public construction spending actually increased by 0.5% to $487.6 billion from April’s revised $485.4 billion.

  • Within public construction, educational construction spending rose by 0.6% to $102.1 billion, while highway construction experienced a decrease of 0.5%, falling to $147.6 billion from $148.3 billion.

ISM Manufacturing dropped to 48.5%, showing continuous contraction on production

07/01/2024 11:00 am EST

In June, the ISM Manufacturing PMI Index dropped to 48.5%, falling short of the anticipated 49.1% and signaling a contraction in the manufacturing sector. This decline reflects ongoing challenges within the industry, including reduced production rates and job cuts, which have notably affected firms' profitability.

The contraction indicated by a PMI below 50 points to broader economic strains, manifesting in decreased production activities and reductions in workforce, directly impacting the cash flow and profitability of manufacturing firms. This downturn in manufacturing is concerning for the economy as it reflects a weakening sector that traditionally plays a vital role in economic growth and employment.

The negative shift in the manufacturing landscape has also influenced financial markets. Following the report, yields on government securities rose, suggesting that investors are demanding higher returns for the increased risk, while stock markets reacted negatively, with indices falling. This market movement can be attributed to investor concerns over slowing economic growth and potential impacts on future corporate earnings, leading to a shift towards more risk-averse investments.

Overall, the decline in the ISM Manufacturing PMI not only highlights issues within the manufacturing sector but also raises broader concerns about the economic outlook, prompting reactions across financial markets as investors adjust to the evolving economic landscape.

PCE read in May 2024 shows cooling signs of inflation in US Economy

06/28/2024 09:00 am EST

The latest Personal Consumption Expenditures (PCE) data for May reveals a cooling in U.S. inflation, with both headline and core measures showing moderated price increases. The headline PCE was flat month-over-month and eased slightly year-over-year, while the core PCE, which excludes volatile items like food and energy, rose by just 0.1% month-over-month, maintaining a 2.6% increase year-over-year. This moderation supports the potential for the Federal Reserve to implement interest rate cuts sooner than anticipated. Although the Fed currently projects one rate cut in December, market expectations lean towards two cuts beginning in September, encouraged by the sustained downward trend in inflation. This easing inflation could influence the Fed's upcoming monetary policy decisions, making a case for a shift towards a more accommodative policy stance within the year.

Continuous Jobless claims rise to 1.839 million and initial jobless claims stay at 233,000, pointing towards weaker economy

06/27/2024 12:00 pm EST

The U.S. labor market is showing signs of softening as evidenced by the latest data on unemployment benefits and economic indicators that point to slowing growth. While first-time applications for unemployment benefits slightly decreased last week, the number of people receiving ongoing jobless aid rose to its highest level in over two and a half years. This increase aligns with broader economic trends that suggest a deceleration in activity, raising the likelihood of a Federal Reserve interest rate cut in September.

Specifically, initial jobless claims for the week ended June 22 dropped by 6,000 to a seasonally adjusted 233,000, yet this figure remains at the higher end of this year’s range. The 4-week moving average, which smooths out weekly volatility, also indicates elevated claims levels, underscoring persistent labor market pressures. Meanwhile, the number of continuing claims rose by 18,000 to 1.839 million, marking the highest since late November 2021. This rise is partly influenced by a temporary policy change in Minnesota, allowing non-teaching educational staff to claim unemployment benefits over the summer.

Concurrently, economic reports reveal weaknesses beyond the labor market. Business spending on equipment has declined due to high interest rates and softening demand, with core capital goods orders dropping by 0.6% in May. This decline in investment is significant as it impacts the broader economic momentum and could further influence GDP growth rates. Indeed, the U.S. gross domestic product (GDP) growth was modest at 1.4% in the first quarter, with expectations for the second quarter not exceeding a 1.8% growth rate, which is below what Federal Reserve officials consider non-inflationary.

Adding to the economic challenges, the goods trade deficit widened to $100.6 billion last month as exports fell, suggesting that trade might negatively impact GDP growth this quarter. However, inventory accumulations in wholesale and retail sectors could partially offset this drag.

In conclusion, convergence of rising joblessness, reduced business investment, and trade deficits paints a picture of an economy experiencing significant headwinds. This situation places additional pressure on the Federal Reserve to adjust monetary policy to stabilize economic growth while continuing to monitor inflation closely. The central bank's upcoming decisions will be critical as it navigates these complex economic dynamics.

Norinchukin Bank sells 10 trillion yen worth of US Treasury Bonds and investing in riskier CLO derivatives

06/24/2024 12:00 pm EST

Norinchukin Bank, a Japanese agricultural bank, plans to sell approximately 10 trillion yen ($63 billion) in US and European sovereign bonds. This move is a reaction to mitigate losses from previous rate speculation errors, where the bank assumed that the elevated interest rates in these regions would not persist. This sale represents nearly a sixth of the bank's global securities portfolio.

Due to these misjudgments, Norinchukin now anticipates a net loss of 1.5 trillion yen for the current fiscal year, a significant increase from the previously estimated loss of 500 billion yen. The actual losses may vary depending on the success of the bond sales and market conditions at the time of each transaction.

This strategic shift was announced shortly after Norinchukin revealed plans to overhaul its investment strategy, which historically focused heavily on securities to counteract Japan's negative interest rate environment. The bank's portfolio, heavily weighted in foreign investments, includes significant holdings in collateralized loan obligations (CLOs).

Despite these challenges, Norinchukin remains a major player in the $1.3 trillion CLO market, particularly in purchasing AAA-rated segments. This move back into CLOs occurred after a brief step back during the UK pension crisis last year.

The decision to divest from sovereign bonds and potentially increase exposure to corporate and individual credit risks signifies a major pivot in investment strategy. This comes after the bank faced substantial unrealized losses, which totaled 2.19 trillion yen as of March. To address these issues, Norinchukin is also seeking to raise 1.2 trillion yen from its members, reminiscent of its 2009 fundraising of 1.9 trillion yen following significant losses in asset-backed securities.

This situation at Norinchukin is indicative of broader challenges faced by financial institutions globally as they navigate the volatile interest rate environment. U.S. banks, for instance, reported $516.5 billion in unrealized losses on their securities portfolios at the end of March, highlighting widespread difficulties in the sector.

The scenario at Norinchukin underscores the complexities and risks associated with large-scale securities investments, particularly in a fluctuating rate environment, and raises questions about the bank's future strategic direction and risk management practices.

Swiss Central Bank reduces rates along with Mexico, Brazil and Sweden

06/23/2024 11:00 pm EST

The Swiss National Bank (SNB) became the first major developed-market central bank to embark on an interest rate-cutting cycle. Meanwhile, two emerging-market central banks – Banxico and Central Bank of Brazil – both cut rates in 1Q24, as inflationary pressures continued to ease.

SNB cut its policy rate in March by 25bp, to 1.50%, its first rate cut since December 2014 – when the policy rate was moved into negative territory. At the same time, Central Bank of Mexico cut its target rate by 25bp, to 11.00%, for the first time since February 2021. As such, it joined the Central Bank of Brazil, which started its policy-easing cycle in August 2023 and lowered its Selic target rate twice in 1Q24 – in February and March – by a cumulative 100bp, to 10.75%.

By contrast, two Asian central banks – in Japan and Indonesia – recently raised their policy rates. The Bank of Japan took its policy rate out of negative territory in March and now targets a range of 0.0%-0.1%, as inflation is becoming more sustainable. Bank Indonesia lifted its benchmark rate by 25bp in April, to 6.25%. The Central Bank of the Republic of Turkiye increased its policy rate again in March – by 500bp, to 50.00% – amid a deteriorating outlook for inflation and depreciation of the lira. CPI inflation rose in March to 68.5% yoy and the lira reached a record high level exceeding TRY32 per dollar in April 2024.

Leading Economic Indicator -0.5% in May compared to -0.3% expected

06/21/2024 12:00 pm EST

The U.S. Leading Economic Index (LEI), a predictive measure designed to forecast future economic activity, experienced a notable decline in May, decreasing by 0.5% to a level of 101.2. This drop was more significant than the anticipated 0.3% decline and followed a 0.6% decrease in April, as reported by The Conference Board. The primary factors contributing to this decrease were a reduction in new orders, dampened consumer sentiment regarding future business conditions, and a decrease in building permits.

Looking ahead, The Conference Board anticipates that real GDP growth will decelerate significantly, with projections pointing to a growth rate of less than 1% during the second and third quarters of 2024. This slowdown is largely attributed to the continuing high levels of inflation and elevated interest rates, which are expected to constrain consumer spending—a key driver of economic activity.

Additionally, the report included updates on other economic indicators:

  • The Coincident Economic Index, which measures current economic conditions, showed a slight improvement, rising to 112.4 from 112.0.

  • The Lagging Economic Index, which reflects changes that typically occur after variations in economic activity, slightly decreased to 119.4 from 119.5.

Overall, these indices present a mixed picture of the U.S. economy, with leading indicators signaling a slowdown but not a recession, coincident indicators showing modest growth, and lagging indicators remaining relatively stable. The data underscores the impact of persistent inflation and high interest rates on economic momentum and highlights the cautious outlook of economic forecasters for the coming months.

Initial Jobless Claims rise to 238,000 vs 235,000 estimate. Continuing unemployment claim 1.828 million vs 1.805 million expected

06/20/2024 9:00 am EST

The latest U.S. jobless claims data shows a modest rise in initial claims, with 238,000 new filings for the week, slightly above the anticipated 235,000. This represents a small increase from the prior week's figure of 242,000. Despite this rise, the overall trend in initial claims remains relatively stable, as indicated by the four-week moving average, which rose from 227,250 to 232,750.

Continuing claims, which represent the number of people already receiving benefits, also saw a slight increase. The latest data reports 1.828 million continuing claims, slightly above the expected 1.805 million and up from the previous week’s revised figure of 1.813 million (originally reported as 1.820 million). Similarly, the four-week moving average for continuing claims increased from 1.795 million to 1.806 million, suggesting a slight upward trend in the number of people receiving unemployment benefits.

This data is particularly significant as it corresponds with the survey week, which is used as a reference period for monthly employment reports. The increase in both initial and continuing claims could suggest some softening in the labor market, which may be a point of concern for economic analysts and policymakers. This uptick, although slight, might influence future monetary policy decisions if it continues, especially with ongoing assessments of labor market resilience and inflation dynamics.

Length of yield curve inversion surpasses 1978’s period, signaling incoming severe recession in US economy

06/19/2024 9:00 am EST

A key bond market signal indicating a potential recession has been persistently flashing red, even though the U.S. economy shows no signs of slowing down. The yield curve inversion between two-year and ten-year Treasury yields has been ongoing since early July 2022, marking the longest continuous inversion on record, surpassing the previous 624-day inversion in 1978.

  1. Yield Curve Inversion:

    • The yield curve inversion occurs when short-term bond yields are higher than long-term bond yields, suggesting that investors expect high interest rates in the short term while anticipating lower rates in the long term due to potential economic slowdown.

    • The current inversion has been in place since July 2022, signaling market expectations of an upcoming recession.

  2. Economic Impact:

    • An inverted yield curve typically signals a recession because it reflects expectations of lower future interest rates, often associated with efforts to stimulate a weakening economy.

    • This inversion also impacts economic activity negatively, as higher short-term yields increase borrowing costs, and lower long-term yields reduce incentives for long-term lending and investment.

  3. Current Economic Context:

    • The Federal Reserve cut down its outlook from three interest rate cuts to one rate cut this year.

    • High consumer savings post-pandemic have provided a buffer against rising borrowing costs, helping sustain economic growth.

    • The Fed's measures to provide emergency liquidity last year have helped manage banking sector turmoil, further supporting economic stability.

  4. Long-Term Concerns:

    • Capitalism thrives on positive returns for long-term lending and investments, and an inverted yield curve undermines this principle, potentially hindering economic growth in the long run.

US Retail Sales shows slowdown in May 2024

06/18/2024 9:00 am EST

The consumer spending boom that followed the pandemic appears to be waning, signaling a potential shift in the economic landscape. Shoppers have gradually reduced their spending growth throughout the year, which could be the cooling effect the Federal Reserve has sought in its battle against inflation. However, this slowdown might escalate into broader economic weakness, which could be challenging to reverse.

Key Points:

  1. Retail Sales Slowdown:

    • Post-pandemic retail sales were strong but have started to decline, marking a return to a more typical economic environment.

    • May retail sales increased by only 0.1%, following a revised drop of 0.2% in April.

    • Gas station sales plummeted due to falling prices, and housing-related categories like furniture and building supplies saw decreased spending.

    • Some categories, such as hobby shops, clothing stores, and e-commerce, experienced spending growth.

  2. Economic Indicators:

    • The "control group" of the retail sales report, which excludes autos, building supplies, food service, and gasoline, rose 0.4% in May but fell 0.5% in April.

    • Anecdotal evidence from major retailers and fast-food chains suggests a spending slowdown, especially among lower-income consumers who have depleted their pandemic savings.

    • Increasing delinquency rates on credit cards and car payments indicate rising financial stress among households.

  3. Federal Reserve Perspective:

    • Federal Reserve Chair Jerome Powell acknowledged the growing financial pressures on lower-income Americans.

    • Powell emphasized the importance of maintaining a strong job market and controlling inflation to support those most affected by financial strain.

    • Despite the current challenges, Powell believes that the household sector remains in relatively good shape compared to a year or two ago.

Implications:

  • Economic Resilience: The slowing spending growth could indicate the beginning of a more stable economic period, but it also raises concerns about potential widespread economic weakness.

  • Inflation Control: The slowdown may assist the Fed in controlling inflation, but the impact on lower-income households must be closely monitored.

  • Consumer Behavior: Changes in consumer behavior, especially among lower-income groups, will be crucial in shaping future economic trends.

In summary, while the current economic environment suggests a return to normalcy, the effects of reduced consumer spending and rising financial pressures must be carefully managed to prevent long-term economic downturns.

May PPI dropped unexpectedly to -0.2% compared to economist’s consensus 0.1%

06/13/2024 9:00 am EST

The economic data released today presents a mixed picture. The Producer Price Index (PPI) for May decreased by 0.2%, which is lower than the expected increase of 0.1% and a notable drop from the previous month's 0.5% rise, indicating a reduction in prices received by domestic producers. Initial jobless claims increased to 242,000, surpassing the expected 225,000 and the previous week's 229,000, suggesting a rise in unemployment filings. Core PPI remained flat in May, missing the anticipated 0.3% increase and falling from the previous month's 0.5%. Continuing jobless claims rose slightly to 1.82 million, above the consensus of 1.8 million and the previous 1.79 million, indicating more people are continuing to receive unemployment benefits. The PPI excluding food, energy, and transport components remained unchanged month-over-month, compared to a 0.5% increase previously. On a year-over-year basis, the PPI increased by 2.2%, below the expected 2.5% and slightly down from the previous year's 2.3%. The annual rate for the PPI excluding food, energy, and transport stayed steady at 3.2%. Core PPI rose by 2.3% year-over-year, just below the consensus of 2.4% and down from the previous 2.5%, highlighting subdued core inflation pressures.

Federal Reserve keeping interest rates at 5.20%-5.25%

06/12/2024 03:00 pm EST

The Federal Reserve's recent statement highlights its ongoing efforts to manage economic growth and inflation amidst a backdrop of solid labor market performance and persistent inflationary pressures. The Committee notes that while the economy has continued to expand robustly and job gains have remained strong, inflation, despite easing, is still above the desired 2% target. Over recent months, there has been some progress towards this inflation target, but the pace has been modest.

The Committee's dual mandate focuses on achieving maximum employment and stabilizing prices around a 2% inflation rate over the long term. It recognizes that the risks associated with reaching these objectives have become more balanced compared to the past year, reflecting improvements in economic conditions. However, the economic outlook retains a degree of uncertainty, prompting the Committee to remain particularly vigilant about inflation risks.

In its decision-making, the Federal Reserve has opted to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. This decision underscores the Committee's caution in adjusting policy amid ongoing inflation concerns. The statement clarifies that the Fed does not anticipate reducing the target range until there is greater confidence that inflation is consistently moving towards the 2% goal.

Moreover, the Fed continues to scale back its holdings of Treasury securities and agency debt and mortgage-backed securities, a move aligned with its broader strategy of normalizing monetary policy. This ongoing reduction in asset holdings is part of the Fed's commitment to steering inflation back to its target level.

The Federal Reserve emphasizes its readiness to adapt monetary policy as needed based on the economic outlook and emerging risks. It intends to closely monitor a variety of indicators, including labor market conditions, inflation pressures and expectations, as well as financial and international developments, to ensure that its policy stance remains conducive to achieving its long-term objectives of maximum employment and price stability.

Overall, the Federal Reserve's approach reflects a careful balance between fostering economic growth and containing inflation, with a clear readiness to adjust its policy tools in response to changing economic conditions.

Consumer Price Indices (CPI) rises less than expectation with 0.3% vs 0.4%

06/12/2024 12:00 pm EST

In May 2024, the U.S. Consumer Price Index for All Urban Consumers (CPI-U) remained unchanged on a seasonally adjusted basis, following a 0.3% rise in April, according to the U.S. Bureau of Labor Statistics. This stability is noteworthy against a backdrop of fluctuating prices in specific sectors such as energy and food. Over the past 12 months, the all-items index has increased by 3.3% before seasonal adjustment, reflecting sustained price pressures in the economy.

Significant trends in May included a notable decline in the gasoline index, which fell by 3.6%, contributing to a 2.0% decrease in the overall energy index. In contrast, the shelter index continued its upward trajectory, rising by 0.4% for the fourth consecutive month, and the food index saw a modest increase of 0.1%. Food away from home rose by 0.4%, whereas food at home remained unchanged.

The core index, which excludes food and energy, rose by 0.2% in May, a deceleration from the 0.3% increase in April. This increase was influenced by rises in shelter, medical care, used cars and trucks, and education, while other areas such as airline fares, new vehicles, communication, recreation, and apparel saw declines.

Year-over-year, the all-items index increased by 3.3%, a slight decrease from the 3.4% increase observed up to April. The core index rose 3.4% over the last 12 months. Notably, the energy index over this period rose by 3.7%, while the food index increased by 2.1%.

In terms of specifics, the food at home index increased modestly over the year by 1.0%, with mixed performances across different food groups. Energy commodities experienced varied changes, with gasoline prices rising by 2.2% and electricity prices increasing by 5.9%.

This detailed account of consumer prices indicates a mixed economic environment where certain costs, particularly for shelter and medical care, continue to rise, potentially influencing future inflationary trends and monetary policy decisions. The Bureau's reissued news release corrected an error in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), stating a 0.1% increase prior to seasonal adjustment, highlighting the dynamic and closely monitored nature of inflation data.

US weekly initial jobless claims rose to 229,000, more than expected

06/06/2024 10:00 am EST


The latest data from the US Department of Labor (DoL) shows that initial jobless claims rose by 229,000 for the week ending June 1. This increase surpasses both the initial estimates of 220,000 and the previous week's revised figure of 221,000 (originally reported as 216,000).

Continuing jobless claims also saw an increase, rising by 2,000 to nearly 1.80 million for the week ending May 25, bringing the total to 1.792 million. This indicates a slight rise in the number of people continuing to receive unemployment benefits. These figures suggest a softening in the labor market, with more individuals applying for and continuing to receive unemployment insurance benefits.

ADP employment data shows slow down in job opening in private sectors

06/05/2024 10:00 am EST

In May, private sector employment increased by 152,000 jobs, and annual pay rose by 5.0% year-over-year according to the ADP National Employment Report produced by the ADP Research Institute in collaboration with the Stanford Digital Economy Lab. This report is based on anonymized payroll data from over 25 million U.S. employees, offering a high-frequency and near real-time measure of private-sector employment.

  • Total Private Employment Change: +152,000 jobs

  • Sector Breakdown:

    • Goods-producing sectors: +3,000 jobs

      • Natural resources/mining: -9,000 jobs

      • Construction: +32,000 jobs

      • Manufacturing: -20,000 jobs

    • Service-providing sectors: +149,000 jobs

      • Trade/transportation/utilities: +55,000 jobs

      • Information: -7,000 jobs

      • Financial activities: +28,000 jobs

      • Professional/business services: -6,000 jobs

      • Education/health services: +46,000 jobs

      • Leisure/hospitality: +12,000 jobs

      • Other services: +21,000 jobs

Regional Employment Changes:

  • Northeast: +44,000 jobs

    • New England: -1,000 jobs

    • Middle Atlantic: +45,000 jobs

  • Midwest: +9,000 jobs

    • East North Central: +6,000 jobs

    • West North Central: +3,000 jobs

  • South: +101,000 jobs

    • South Atlantic: +45,000 jobs

    • East South Central: -4,000 jobs

    • West South Central: +60,000 jobs

  • West: -10,000 jobs

    • Mountain: +8,000 jobs

    • Pacific: -18,000 jobs

Employment Changes by Establishment Size:

  • Small establishments: -10,000 jobs

    • 1-19 employees: +26,000 jobs

    • 20-49 employees: -36,000 jobs

  • Medium establishments: +79,000 jobs

    • 50-249 employees: +49,000 jobs

    • 250-499 employees: +30,000 jobs

  • Large establishments: +98,000 jobs (500+ employees)

Pay Insights:

  • Pay for Job-Stayers: +5.0%

  • Pay for Job-Changers: +7.8%

Median Annual Pay Change by Industry for Job-Stayers:

  • Goods-producing:

    • Natural resources/mining: +4.4%

    • Construction: +5.3%

    • Manufacturing: +4.7%

  • Service-providing:

    • Trade/transportation/utilities: +4.6%

    • Information: +4.6%

    • Financial activities: +5.1%

    • Professional/business services: +4.8%

    • Education/health services: +5.5%

    • Leisure/hospitality: +5.5%

    • Other services: +5.3%

Median Annual Pay Change by Firm Size for Job-Stayers:

  • Small firms (1-19 employees): +4.2%

  • Small firms (20-49 employees): +5.0%

  • Medium firms (50-249 employees): +5.2%

  • Medium firms (250-499 employees): +5.0%

  • Large firms (500+ employees): +4.9%

The report highlights that while job gains and pay growth are slowing, the labor market remains solid. The focus is on monitoring sectors showing weakness, particularly in both production and consumer areas.

For more details, including interactive charts and the full dataset, visit ADP Employment Report.

Jobs openings fall to 8.059 million compared to expectation at 8.36 million

06/04/2024 10:00 am EST

The latest Job Openings and Labor Turnover Survey (JOLTS) report released by the Bureau of Labor Statistics indicates that the number of job openings in the US decreased to 8.059 million in April. This marks the second consecutive month of decline, reaching a new three-year low. The previous month had a downwardly revised figure of 8.36 million. This drop in job openings fell short of economists' expectations, which predicted 8.36 million job openings according to FactSet estimates. This trend suggests further cooling in the labor market.

US ISM Manufacturing PMI drops to 48.7% in May 2024 vs. 49.6% expected

06/03/2024 10:00 am EST

ISM Manufacturing PMI and construction spending in May show slow down of production :

  1. S&P Flash U.S. Manufacturing PMI (May):

    • Actual: 51.3

    • Median Forecast: 50.7

    • Previous: 50.0

    • Summary: The S&P Flash U.S. Manufacturing PMI for May increased to 51.3, surpassing both the median forecast of 50.7 and the previous month's value of 50.0, indicating an expansion in the manufacturing sector.

  2. Construction Spending (April):

    • Actual: -0.1%

    • Median Forecast: 0.2%

    • Previous: -0.2%

    • Summary: Construction spending for April decreased by 0.1%, falling short of the median forecast of a 0.2% increase but showing a slight improvement from the previous month's decline of 0.2%. This indicates a marginal contraction in construction activity.

  3. ISM Manufacturing Index (May):

    • Actual: 48.7%

    • Median Forecast: 49.6%

    • Previous: 49.2%

    • Summary: The ISM Manufacturing Index for May fell to 48.7%, below the median forecast of 49.6% and the previous month's value of 49.2%, signaling a contraction in the manufacturing sector.

While the S&P Flash U.S. Manufacturing PMI suggests growth in manufacturing, the ISM Manufacturing Index indicates a contraction. Construction spending remains weak, with a slight decrease in April.

Initial Jobless Claims rise to 219,000, beating expecatations with monthly average increase

05/30/2024 10:00 am EST

Week of May 25th 2024 ‘s initial jobless claims data:

  1. Initial Jobless Claims:

    • Rose by 3,000 to 219,000.

    • Expected: 218,000.

    • Previous week: 216,000 (revised from 215,000).

  2. Four-Week Moving Average:

    • Increased by 2,500 to 222,500.

    • Previous week's average: 220,000 (revised up by 250).

  3. Continuing Claims:

    • Increased to 1.791 million.

    • Previous week: 1.787 million (revised from 1.794 million).

  4. Insured Unemployment Rate:

    • Unchanged at 1.2% for the week ended May 18.

  5. Unadjusted Initial Claims:

    • Actual initial claims: 195,615.

    • Increase of 2,898 from the prior week.

    • Seasonal factors expected no change from the previous week.

Gold price rises as investors are waiting for clearer indication of rate cuts

05/28/2024 10:00 pm EST

Gold prices increased on Tuesday, caused by a weaker dollar as investors anticipated U.S. inflation data expected later this week, which may provide insights on the timing of potential interest rate cuts.

Gold is rebounding after a correction, aided by a declining dollar index and slightly lower yield curve rate. Federal Reserve's unclear monetary policy could limit significant gold price increases, making future movements highly data-dependent.

The dollar fell to a more than one-week low, making gold cheaper for holders of other currencies. Investors are focusing on the U.S. core personal consumption expenditures price index (PCE), the Fed's preferred inflation measure that due on Friday.

Fed meeting minutes from last week indicated that the current policy stance would involve maintaining the benchmark rate at its present level.

For the past two years, global central banks have been increasing their gold holdings to diversify foreign currency reserves.

Despite this demand, global physically-backed gold exchange-traded funds (ETFs) experienced net outflows of 11.3 metric tons last week, according to the World Gold Council.

In other precious metals, silver rose 0.9% to $31.95 per ounce following a 4.4% increase on Monday. Platinum increased by 0.3% to $1,057.10, while palladium declined by 1.1% to $978.00.

Initial Jobless Claims fall to 215,000 and insured unemployment increased to 1.782 million

05/23/2024 10:00 pm EST

The latest data on U.S. unemployment insurance claims reveals nuanced shifts in the job market. For the week ending May 18, the number of seasonally adjusted initial claims decreased by 8,000 to 215,000, down from the previous week's revised level of 223,000. This decrease suggests a reduction in layoffs and points to a potentially stabilizing labor market.

However, the 4-week moving average, which helps smooth out week-to-week volatility, increased by 1,750, rising to 219,750. This uptick indicates a slight increase in jobless claims over the month, suggesting ongoing fluctuations in the labor market.

The insured unemployment rate, which represents the percentage of the labor force receiving unemployment benefits, remained steady at 1.2 percent for the week ending May 11, unchanged from the previous week. This stability suggests that while there are fluctuations in weekly claims, the overall rate of those receiving benefits has not increased.

The total number of people receiving benefits, or the insured unemployment, stood at 1,794,000 during the week ending May 11, marking an increase of 8,000 from the previous week's revised level. This indicates a slight rise in the number of people claiming ongoing benefits.

Additionally, the 4-week moving average for insured unemployment increased by 5,000 to 1,782,250. This gradual rise over the four weeks points to an increasing trend in the number of people receiving unemployment benefits, suggesting that some workers are experiencing challenges in the job market.

In conclusion, the data reflects a labor market experiencing minor fluctuations, with a slight increase in the average number of claims and insured unemployment. Such trends warrant close monitoring as they may signal shifts in employment stability and economic conditions.

Fed Governor Waller discussed about restrictive fiscal policy: “Progress have been made slowly”

05/21/2024 11:00 pm EST

At the Peterson Institute's Washington Forum on the Canadian Economy, Federal Reserve Chair Jerome Powell provided an optimistic yet cautious view of the U.S. economy's current status and its future trajectory. Despite setbacks in the first quarter of 2024 with unexpectedly high inflation and economic activity data, Powell remains confident that inflation will revert to lower levels experienced the previous year. However, his confidence has somewhat diminished due to the recent data.

Powell highlighted that although there was initial optimism about significant progress on inflation and potential rate cuts earlier, the first quarter data suggested otherwise, sparking debates about the adequacy of the current restrictive monetary policy. Recent data, however, suggests that the Fed's restrictive measures are effectively cooling aggregate demand and helping to resume progress toward achieving a 2% inflation target.

Economic indicators show a mix of strength and signs of moderation. While real GDP growth in late 2023 was robust, the first quarter of 2024 showed a slowdown primarily due to volatile components like trade and inventory adjustments. Despite this, underlying demand measures indicate sustained strength. Retail sales data and ISM survey indices suggest some moderation in consumer spending and business activity, which could be signaling a broader economic cooling.

In terms of the labor market, although still strong, there are signs of a shift. The hiring pace has slowed, and the unemployment rate has slightly increased, suggesting a better balance between labor demand and supply. Wage growth remains above what would be consistent with a 2% inflation target, but there are indications of moderation there as well.

Powell remains cautiously optimistic about continuing progress on inflation, influenced by recent data. He advocates a data-dependent approach to monetary policy, emphasizing that the Fed's policy adjustments are gradual and responsive to economic shifts, contrary to criticisms of being "overly data dependent." Powell’s stance underscores a commitment to steering the economy towards stable growth and inflation, with further rate decisions hinging on upcoming economic data.

“Mel rule" shows trends of rising unemployment

05/18/2024 11:00 pm EST


BCA Research warns of potential economic downturn as unemployment rates rise across many U.S. states, suggesting the national labor market's strength may be waning. This concern arises from observations made using the "Mel Rule," an advanced version of the "Sahm Rule," which has recently been triggered in 20 states. The Mel Rule refines this by weighing state unemployment rates by their labor forces, thus providing a clearer picture of national unemployment trends. It activates when unemployment rises significantly above its 18-month low, a situation that historically precedes recessions. Given this, BCA's MacroQuants stocks model is near downgrading its stock recommendations, with many indicators showing bearish signals. BCA suggests shifting investments towards U.S. healthcare, expected to perform better in recessionary conditions and currently deemed undervalued. They project that the U.S. could face a recession by late 2024 or early 2025, advising caution in stock market investments.

Sahm Rule shows possible rising unemployment and US recession

05/18/2024 11:00 pm EST

Sahm Rule was in a rising trend since January 2023 and reaching to 0.37% in April 2024. Last time we have the constant rate of increase for a substantial period of time was between May 2007 to December 2007 and December 2000 to July 2001, prior to the dot-com bubble recession and the financial crisis of 2008.

Below are some of the explanations on the historical chart of analyzing Sahm Rule and recession:

  1. Sahm Rule Explanation: The Sahm Rule triggers a recession signal when the three-month moving average of the national unemployment rate rises by at least 0.5 percentage points relative to its low during the previous 12 months. This indicator is used to predict the start of recessions.

  2. Correlation to Recessions: The shaded areas in the chart denote U.S. recessions as determined by the National Bureau of Economic Research (NBER). Each peak in the Sahm Rule closely aligns with these shaded recessions, highlighting its effectiveness as a predictive tool. Notably, peaks are visible around the early 1980s, early 1990s, early 2000s, the 2008 financial crisis, and most recently, the 2020 pandemic.

  3. Current Observations: The most recent data point in April 2024 shows the Sahm Rule indicator at 0.37 percentage points. This is below the 0.5 threshold, suggesting that unemployment rate is rising and

In summary, the Sahm Rule has historically shown a strong correlation with the onset of recessions, as demonstrated by its timely rise before officially declared recessions. The current indicator level warrants close monitoring, as a continued rise could suggest another potential economic downturn.

New York Community (NYCB) sells warehouse loans to JP Morgan

05/16/2024 03:00 pm EST


New York Community Bancorp, Inc. (NYCB) has announced a significant transaction with JPMorgan Chase & Co. (JPM) involving the sale of approximately $5 billion in mortgage warehouse loans to JPM. The proceeds from this sale will be reinvested into cash and securities, which will enhance NYCB's liquidity profile. This strategic move is expected to increase the ratio of cash and securities to total assets to 24%, up from 20% as of March 31, 2024.

As of the end of the first quarter, NYCB had total liquidity of $28.6 billion, comprising $15.5 billion in cash and $13.1 billion in borrowing capacity and high-quality liquid assets. The company's management highlighted the quality of the mortgage team at Flagstar, noting the success in executing an accretive transaction with JPMorgan. Despite the sale, NYCB remains committed to its mortgage business and plans to continue providing high-quality service to its mortgage customers and partners.

The transaction is contingent upon the completion of due diligence, negotiation of definitive documentation, and the satisfaction of customary closing conditions. The sale is expected to be finalized in the third quarter of 2024. This move is part of NYCB's broader strategy to shrink its balance sheet by reducing non-core assets and diversifying its loan portfolio. The bank aims to reduce its commercial real estate portfolio from $47 billion to approximately $30 billion while building a strong middle market relationship banking franchise. Efforts to grow core deposits are also expected to improve the bank's deposit mix in the future.

In the past six months, NYCB shares have declined by 58.3%, whereas JPM shares have increased by 34.6%.

Initial jobless claims dropped to 222,000 compared to previous week’s 232,000

05/16/2024 09:00 am EST

The latest report on U.S. initial jobless claims showed a higher-than-expected number of Americans filed for unemployment benefits last week, though the figures did show a decline from the previous week. Specifically, claims fell to 222,000 for the week ended May 11, from an upwardly revised 232,000 the week before, against economists' expectations of 219,000.

The four-week moving average, which smooths out week-to-week volatility, rose slightly by 2,500 to 217,750. This incremental increase in the moving average may suggest a slight softening in labor market conditions, though not markedly so.

These labor market indicators are closely monitored by the Federal Reserve as it assesses the overall health of the employment sector. A softening labor demand could ease wage pressures, which in turn might alleviate some inflationary pressures. This dynamic is particularly relevant as the Fed considers adjustments to interest rates, which are currently at levels not seen in over two decades.

Further context for the labor market's condition was provided by additional data indicating that job additions in April were the lowest in six months and annual wage growth has slowed to under 4% for the first time in nearly three years. Additionally, consumer price inflation figures for last month showed a 3.4% increase, a deceleration from March and aligning with market expectations. This confluence of data could potentially support a case for the Federal Reserve to lower interest rates if these trends continue, signaling a cooling economy.

Initial Jobless Claims: 222,000 vs 220,000 estimate, previous week jobless claim: 232,000

Continuing Claims: 1,794,000 vs 1,780,000 estimate, previous 1,781,000

Consumer Price Index maintains at 3.4%, still behind Federal Reserves’ 2% target

05/15/2024 02:00 pm EST

Consumer Price Index (CPI-U) data for April 2024 and the monthly changes spanning from October 2023 to April 2024.

Summary of the changes are as below:

  1. General Trend: The CPI-U consistently increased, albeit slightly, on a seasonally adjusted basis each month from October 2023 to April 2024. This indicates a steady, albeit modest, rise in the price levels of a broad set of consumer goods and services over these months.

  2. Year-over-Year Inflation: For the 12 months ending in April 2024, the all items index rose by 3.4%, showing overall inflation is still persistent, though the pace slightly slowed compared to the previous month.

  3. Major Contributors:

    • Shelter and Transportation Services: Both have seen significant increases, with shelter up by 5.5% and transportation services surging by 11.2% over the past year, underscoring their major roles in driving the inflation figures.

    • Energy: Fluctuated notably over the period, with sharp decreases and increases in some months. However, it recorded a year-over-year increase of 2.6%, driven largely by rises in gasoline prices.

    • Food: Overall, the food index rose by 2.2% over the year, with food away from home experiencing a more significant increase of 4.1% compared to food at home, which only increased by 1.1%.

  4. Deflation in Certain Sectors:

    • Used Cars and Trucks: This category saw a substantial decline of 6.9% over the year, which might suggest an adjustment following previous high inflation rates in this sector during and post-pandemic.

    • New Vehicles: Also declined, though more modestly at -0.4%, indicating a potential easing in the auto market.

  5. Stable but Essential Categories:

    • Medical Care Services and Commodities: These indices showed moderate increases, suggesting ongoing but stable cost pressures in healthcare.

    • Utility Services: Showed a mixed performance with a significant drop in piped gas services but a rise in electricity prices.

Federal Reserve Chair Jerome Powell optimistic about the economy and Fed policy to tame inflation

05/14/2024 01:00 pm EST

Federal Reserve Chair Jerome Powell recently provided an optimistic outlook on the U.S. economy during a banking event in Amsterdam, expressing confidence in continued above-trend growth despite some recent data showing faster-than-expected inflation rates early in the year. Powell noted a slight decrease in his confidence regarding inflation but maintained that it would likely return to the lower levels seen last year. He indicated that further rate hikes were unlikely based on the current data, although the prospect of rate cuts has become less certain.

Powell's remarks aligned with his previous comments following the Fed's last meeting, emphasizing consistency in the Fed's stance even as recent producer price data came in higher than expected. The Fed's policy rate has remained steady at 5.25% to 5.5% since July, with less specific guidance on potential rate reductions this year.

Highlighting economic growth of about 2% this year, slightly above the Fed's long-term potential estimates, Powell pointed to a strong labor market bolstered by immigration. He detailed the economic benefits of immigration, noting that new workers help fill job vacancies and contribute to the economy through taxation and consumption. Powell's comments underscored the Federal Reserve's cautious optimism about the economic outlook, balancing inflation concerns with ongoing economic strength and robust labor market conditions.

PPI top line demand 0.5% vs 0.3%, exceeding economists’ expectations

05/14/2024 11:00 am EST

The latest Producer Price Index (PPI) data presented a mixed picture of the U.S. inflationary environment, reflecting certain pressures in the economy while aligning with broader expectations on a year-over-year basis. The PPI for final demand in April rose by 0.5%, exceeding expectations of a 0.3% increase. This marked an uptick from the previous month's initially reported 0.2%, which was later revised to a decrease of 0.1%, indicating a notable adjustment in prior assessments of inflationary pressures.

The core PPI, which excludes volatile food and energy prices, also showed a higher-than-expected monthly rise of 0.5% compared to the anticipated 0.2%. However, on a year-over-year basis, this measure met expectations at 2.4%, reaffirming the view that underlying inflationary pressures, excluding more volatile categories, remain steady. The consistency in the annual core rate suggests that, despite monthly fluctuations, the underlying inflation trend is stable and aligned with economic forecasts.

The market's initial reaction to the month-over-month PPI data likely stemmed from the unexpected revision in March's figures, which shifted the narrative from a mild increase to a slight reduction in producer prices. This revision puts the latest monthly increase into perspective, indicating that the perceived acceleration in inflation might be more about the adjustment of past data rather than a new trend. Furthermore, the influence of commodity prices, particularly the recent movements in oil prices, seems to be a significant factor in the monthly volatility observed in the PPI.

Overall, while there may appear to be a short-term acceleration in producer prices, the adjustment to previous data and the alignment of the year-over-year core PPI with expectations suggest that the underlying price levels are consistent with what economists had anticipated. This scenario underscores the importance of looking beyond immediate monthly fluctuations and focusing on longer-term trends to gauge true inflationary pressures in the economy.

Summary of PPI today:

  • PPI final demand +0.5% vs +0.3% expected

  • PPI excluding food/energy +0.5% vs +0.2% m/m expected

  • Prior excluding food/energy +0.2% (-0.1% revision)

Market is currently anticipating the CPI report on May 15th 2024, report is likely to cause volatility in the market.

Yield curve suggests recession coming to US economy

05/10/2024 11:00 am EST

10 year and 2 year credit spread inverted for 770 days since April 5th 2022.


The yield curve inversion, as illustrated in the chart from the Federal Reserve Bank of St. Louis, is a financial phenomenon where the interest rates on long-term bonds are lower than those on short-term bonds. This inversion, specifically in the spread between the 10-year and 2-year U.S. Treasury securities, is notable as it's often seen as a predictor of economic recession. Historical data has shown that such inversions typically precede recessions, marked by the shaded areas in the chart. For instance, the inversion observed before the 2008 financial crisis and the 2020 COVID-19 pandemic reflected economic downturns that followed. The recent inversion indicated on the chart suggests a potential forthcoming economic slowdown, raising concerns about the future stability of economic growth. This predictive nature of yield curve inversions is crucial for investors, economists, and policymakers who monitor these trends to gauge the economic outlook.

Consumer Sentiment missed estimates in May 2024

05/10/2024 10:00 am EST

Consumer sentiment missed market estimate in May 2024.

University of Michigan consumer sentiment (preliminary) for May 67.4 versus 76.0 estimate.

Weekly jobless claims climbed up to 231,000, surpassed economists’ estimates

05/09/2024 11:00 am EST

The recent spike in initial unemployment claims to their highest level since August 2023 indicates potential shifts in the U.S. labor market, which has otherwise appeared strong. With claims rising to 231,000, surpassing estimates, and following a trend of declining job openings, it seems there might be emerging signs of cooling in the labor market.

The increase in continuing claims and the four-week moving average suggests some volatility and possibly an end to the low unemployment phase experienced recently. Despite this, the job market's fundamentals, like a still-low unemployment rate of 3.9%, suggest resilience, although the smaller-than-expected increase in nonfarm payrolls in April might indicate a slowdown.

Market reactions to these developments have been relatively muted, with slight negativity in stock futures and mixed Treasury yields. This could reflect uncertainty about the economic outlook, especially as the Federal Reserve closely monitors these figures to guide its monetary policy amidst ongoing efforts to manage inflation.

The central bank's expectations of lowering interest rates by September could be influenced by such labor market trends, underscoring the importance of upcoming job market data to assess the economic trajectory further.

Expecting more bank failure happening in 2024

05/04/2024 05:00 pm EST

The warning from Federal Reserve Chair Jerome Powell regarding potential bank failures, followed by the closure of Republic First Bank, underscores the challenges smaller and medium-sized banks are grappling with in the current economic environment. Rising interest rates and issues in the commercial real estate sector are key factors exacerbating these challenges. Republic First Bank's closure, while relatively small in the broader context, reflects ongoing profitability issues linked to increasing funding costs and the impact of fixed-rate assets. These challenges persist across the banking industry and contribute to negative outlooks from credit rating agencies like Moody's and Fitch. The closure of several midsize banks last year and the subsequent regional banking crisis have heightened concerns about potential contagion effects reminiscent of the 2008 financial crisis. However, regulatory and legislative efforts, as well as the interconnectedness of the global financial system, have helped mitigate major aftershocks thus far. Commercial real estate (CRE) remains a significant concern for regional banks, particularly as a substantial portion of CRE loans approach maturity between 2023 and 2025. Factors such as lower property values and decreased demand for office spaces post-pandemic increase the risk of loan defaults, impacting banks with sizable CRE concentrations. Additionally, the uncertainty surrounding interest rate movements affects net interest income (NII), a critical metric for banks. Higher interest rates make it challenging for banks to earn significant returns on loans and investments while potentially leading to increased funding costs. Smaller institutions are particularly vulnerable to declines in NII, which could render them technically insolvent if prolonged. Overall, the combination of these factors underscores the precarious position of smaller and regional banks in navigating the current economic landscape. While well-capitalized institutions may weather the storm, uncertainties surrounding interest rates and CRE markets continue to pose significant risks to the banking sector as a whole.

Oil Prices are softened on May 3rd 2024

05/03/2024 03:30 pm EST

Oil prices saw a decline on Friday, facing the sharpest weekly drop in three months. This drop comes as investors reacted to weaker-than-expected U.S. jobs data and speculated about the timing of a potential Federal Reserve interest rate cut. Brent crude futures fell by 0.55% to $83.21 a barrel, while U.S. West Texas Intermediate (WTI) crude dropped by 0.65% to $78.44 a barrel.

Concerns that persistent high interest rates might dampen economic growth, particularly in the U.S.—a major oil consumer—contributed to the price declines. Both Brent and WTI are set to end the week with losses around 7% and 6.5%, respectively.

In light of the recent jobs data, which showed a slowdown in U.S. job growth and cooling wage gains, traders are increasingly betting on a rate cut by the Federal Reserve as early as September. This anticipation comes even as the Fed maintained steady rates recently, citing high inflation which could delay any cuts.

Additionally, U.S. energy firms have reduced the number of oil and natural gas rigs, signaling a potential slowdown in future output. This marks the lowest level of operational rigs since January 2022. Geopolitical tensions have also influenced oil prices, although there's a potential easing on the horizon with talks of a ceasefire between Israel and Hamas.

Looking ahead, the next OPEC+ meeting on June 1 may extend current oil output cuts if the demand for oil does not show significant improvement. This decision could further impact oil price trends in the coming months.

Soft Job Reports Drive Stocks Rally on May 3rd 2024

05/03/2024 03:00 pm EST

Wall Street experienced a robust rally on Friday, driven by a weaker-than-expected employment report that bolstered investor optimism for potential Federal Reserve policy easing, while also affirming the resilience of the U.S. economy. The Nasdaq led gains among the major indexes, significantly aided by Apple's announcement of a record $110 billion share buyback program, which saw its shares jump by 7.2%.

The softer employment data suggested a cooling labor market, which aligns with Fed Chair Jerome Powell's conditions for putting inflation on a sustainable downward trajectory without harming economic stability. This led investors to anticipate possible rate cuts, with expectations increasing for a reduction as early as September.

All major sectors, except energy, recorded gains, with technology stocks seeing the largest increase. This positive sentiment was further supported by Powell's dovish statements earlier in the week and a low reading on the CBOE Volatility Index, indicating reduced market fear.

Despite a few negative notes, such as Expedia’s reduced revenue forecast, overall market trends were upbeat with the S&P 500 and Dow Jones also posting substantial gains. The earnings season contributed positively, with a high percentage of companies in the S&P 500 beating consensus estimates.

In summary, the market's performance last week reflected a growing confidence among investors that the Fed might adopt a more accommodative policy stance in the coming months, which could further fuel market gains if the economic indicators continue to support such a shift.

Florida’s real estate market softening as sellers are flooding the market with properties

05/01/2024 03:00 pm EST


Florida's real estate market is experiencing a significant cooling period, highlighted by an increase in the median time homes remain on the market—from 24 days to 57 days. This slowdown suggests a shift from a seller's to a buyer's market, driven by rising costs associated with homeownership such as HOA fees, insurance costs, and property taxes, as well as a surge in new listings. These changes come after a period of sustained price growth, which was unusual given the rise in interest rates. The adjustment in the market could benefit buyers previously unable to afford homes in the area but also reflects broader economic pressures impacting real estate values and buyer sentiment.

Compounding these challenges, high interest rates set by the Federal Reserve at 5% and mortgage rates at 8% are causing a stagnation in the market. Homeowners with mortgages below 5% are hesitant to sell at lower prices, leading to a freeze in market activity. However, there's a noticeable shift as some sellers are beginning to adjust their expectations and lower their prices to attract buyers, signaling a potential gradual move towards market equilibrium.

Fed FOMC meeting keeps interest rates at 5.25% - 5.50% level under “higher for longer” narrative

05/01/2024 03:00 pm EST

The Federal Reserve's latest decision to maintain interest rates between 5.25% and 5.50% reflects their ongoing struggle to manage inflation, which remains above their 2% target. The decision to keep rates steady, which was anticipated, demonstrates the Fed's cautious approach amidst uncertain economic signals. Their adjustment in the reduction of bond holdings, moving from a more aggressive quantitative tightening strategy to a slower pace, suggests a subtle shift towards easing without making significant changes to the interest rate.

This careful balancing act aims to stabilize economic growth while keeping inflation pressures in check. The Fed's stance that further rate hikes are unlikely in the near term provided some reassurance to the markets, as indicated by the positive response from the Dow Jones Industrial Average.

The current economic environment still presents challenges, including persistent inflation and modest economic growth, which complicate the Fed’s efforts to return to a stable pricing environment. Moving forward, the Fed's decisions will likely continue to be heavily influenced by incoming economic data, particularly regarding inflation and employment trends, as they navigate towards achieving their dual mandate of price stability and maximum employment.

CME Fed Watch Tool Probability May 1st, 2024

05/01/2024 12:00 pm EST

The CME FedWatch Tool provides a visual representation and analysis of market expectations regarding Federal Reserve monetary policy decisions. As shown in the current data for the upcoming Federal Reserve meeting on May 1, 2024, there is a significant consensus among market participants, with a 99% probability that the Federal Reserve will maintain the target rate at the current range of 525-550 basis points (bps). This overwhelming probability suggests that investors are largely confident that the economic conditions at that time will not warrant a change in the interest rate policy, specifically, no rate hikes are anticipated.

Furthermore, the graph indicates a minimal possibility, at 1%, of a rate increase to the range of 550-575 bps. This near-unanimity in market expectations reflects a consensus view likely driven by recent economic data, public statements from Federal Reserve officials, and prevailing economic conditions that support a steady approach to monetary policy.

The FedWatch Tool, therefore, serves as a crucial barometer for gauging the financial markets' expectations of U.S. monetary policy moves and provides an immediate visual insight into the perceived direction of the U.S. economy based on interest rate projections. As such, this tool is particularly valuable for investors, policymakers, and analysts looking to understand market sentiment and prepare for potential impacts on financial markets following Federal Reserve meetings.

With the continued projection of high interest rates environment, it is likely that Federal Reserve’s fight against inflation is not completed yet. Given the market currently trading with an expectation of 7 rate cuts, the impact will be rather volatile once the rate cut expectations are not materialized.

Fed Minutes, Dot Plots in focus as market trades in the first day in May 2024

05/01/2024 11:00 am EST


U.S. stock markets experienced slight fluctuations as investors processed the latest labor market data and braced for the outcome of the Federal Reserve's policy meeting. The Dow Jones Industrial Average marginally rose by 0.1%, while the S&P 500 and NASDAQ Composite saw declines of 0.2% and 0.1%, respectively.

Labor Market Data:

  • The strength of the U.S. labor market was underscored by the ADP report, which showed a higher-than-expected addition of 192,000 jobs in April, surpassing forecasts of 179,000. March's figures were also revised upwards from 184,000 to 208,000.

  • This robust job growth suggests that the Federal Reserve might delay any potential interest rate cuts, especially given ongoing inflation pressures.

Federal Reserve Meeting:

  • The Fed is anticipated to maintain interest rates, with focus turning to Fed Chair Jerome Powell’s comments for indications of future monetary policy. Given the strong economic data, Powell's outlook may lean hawkish.

Market Expectations:

  • Investors have adjusted their expectations significantly from the start of the year, now barely anticipating a single quarter-point rate cut by the end of the year, a stark contrast to earlier predictions of multiple cuts.

Corporate Earnings Impact:

  • The earnings season continues to influence market sentiments, with several major companies reporting disappointing results:

    • Kraft Heinz saw its stock drop almost 5% due to lower-than-expected sales, impacted by consumer pushback against price increases.

    • Yum! Brands experienced a decline of over 3% after reporting a decrease in global same-store sales.

    • Estee Lauder and CVS Health both faced declines after issuing less favorable earnings reports and guidance.

    • On a positive note, Pfizer and Amazon saw their stocks rise following strong earnings performances, with Pfizer raising its full-year outlook and Amazon surpassing earnings expectations despite a disappointing revenue forecast.

    • Advanced Micro Devices and Starbucks also reported results that led to significant stock price movements, reflecting investor reactions to corporate financial health and future prospects.

Oil Market Dynamics:

  • Crude oil prices declined further amid unexpected increases in U.S. crude stockpiles and production, suggesting less tight supply conditions than previously anticipated. This development comes alongside geopolitical developments that might impact oil supply stability.

Overall, the day's financial landscape was shaped by a combination of strong domestic labor data, corporate earnings reports with mixed impacts, and the anticipation of the Federal Reserve's forthcoming decisions on interest rates, all playing pivotal roles in guiding investor sentiment and market movements.

Updates of Fed’s Decision will be updated here.

Republic First Collapsed And Assets Seized By FDIC

04/27/2024 06:00 pm EST

Republic First Bancorp, a Philadelphia-based regional bank, was seized by Pennsylvania regulators on Friday. This action followed a turbulent period for the bank, which included a failed deal to secure a vital $35 million investment from the Norcross-Braca Group and challenges stemming from a decline in deposits and a struggling mortgage lending business. The backdrop to this seizure includes several factors:

  • Declining Deposits and Mortgage Business: Republic First reported to investors last year that deposits had decreased, and the mortgage loan portfolio's value had declined significantly due to rising interest rates. Consequently, the bank decided to exit the mortgage business and shift focus to consumer deposits, despite a substantial portion being uninsured.

  • Failed Investment Deal: The bank was set to receive an investment contingent on filing its 2022 report and holding a shareholder meeting. The investment group withdrew after the bank did not conduct the shareholder meeting as scheduled. Nonetheless, Republic First claimed that their strategic plan was robust enough to proceed without the investment, citing adequate capitalization, a strong deposit base, and ample liquidity.

  • Regulatory Action and Acquisition: The Pennsylvania Department of Banking and Securities took control of the bank, which led to an agreement for Fulton Bank to acquire Republic First's 32 branches, spreading across multiple states. This agreement is set to rebrand the branches under Fulton Bank.

  • Nasdaq Delisting and Reporting Issues: Before being seized, Republic First faced delisting from Nasdaq for failing to file its annual report, a situation attributed to the former executive team's inadequate internal controls. The bank's financial auditor had previously reported "material weaknesses" in financial controls, and the bank dismissed that auditor in February.

  • Banking Sector Context: Republic First's collapse is the fourth such event in 2023, following larger bank collapses like Silicon Valley Bank, Signature Bank, and First Republic Bank. Despite these events, analysts like Feddie Strickland from Janney Montgomery Scott suggest the banking sector remains stable, with last year's failures linked to banks with specific specializations, implying that smaller, more diversified banks could be in a stronger position.

The seizure of Republic First Bancorp reflects broader challenges in the banking industry, especially for institutions grappling with the consequences of rising interest rates, sector-specific risks, and stringent regulatory requirements. The rapid succession of bank failures highlights the importance of robust financial controls and the impact of sector specialization on the stability of financial institutions.

Fulton Bank acquired all the assets and liabilities in Republic First Bancorp and will continue the operations on depositors’ savings.

High PCE number is keeping interest rates high for the US Economy

04/26/2024 01:00 pm EST

The concerns about U.S. inflation are intensifying, with investors bracing for the possibility that the 10-year Treasury yield might surpass the 16-year high of 5% reached last October. This anxiety is fueled by signs of enduring inflation, which diminish the likelihood of significant Federal Reserve rate cuts, as such actions could potentially exacerbate inflationary pressures. Currently, the yield on the benchmark 10-year Treasury note has climbed 80 basis points this year and is at a five-month high of 4.70%.

Investor sentiment toward bonds appears bearish, as evidenced by the lowest fixed income allocations since 2003 among global fund managers and the most bearish Treasury positioning of the year among certain hedge funds. Despite this, some asset managers are increasing their bullish positions. The concern hinges largely on inflation; without signs of it being reined in, there is a belief that yields could continue to rise, with some investors like Don Ellenberger of Federated Hermes preparing for yields to potentially hit 5.25%.

Recent PCE price index data, excluding food and energy, has shown a significant increase in the first quarter, leading to a recalibration of expectations for Fed rate cuts to just 35 basis points this year, down from the 150 points anticipated at the start of 2024. The forthcoming PCE data for March could further narrow the window for rate cuts this year, particularly if it suggests that inflation remains high.

The Treasury yield levels are significant to markets since high yields can translate into increased borrowing costs, potentially tightening financial conditions. A previous uptick in yields led to a sell-off in the S&P 500, but a subsequent drop in yields saw a market rebound. However, the current rise in yields has coincided with a trimming of this year's stock rally gains.

The divide among investors is notable. Some are adding to their fixed income holdings, betting that yields won’t increase significantly unless the Fed signals further rate hikes. Others, like Arthur Laffer of Laffer Tengler Investments, expect yields to soar even higher, potentially to 6%, due to persistent inflation.

Market searching for recovery after Google’s earnings beat

04/26/2024 10:30 am EST

U.S. stock futures are indicating an upward trajectory as the week's final trading session approaches, drawing attention to recent earnings reports from prominent technology firms Alphabet and Microsoft, as well as impending U.S. inflation data.

  1. Futures Point to a Higher Opening: Futures in New York suggest a positive start to the day's trading, with the tech-heavy Nasdaq 100 showing the strongest pre-market gains. This follows a downturn in the prior session, triggered by disappointing U.S. economic growth figures and persistent inflation concerns, which have dampened hopes of near-term interest rate cuts by the Fed.

  2. Tech Earnings in the Spotlight: Alphabet’s shares surged after-hours due to higher-than-expected revenue and the announcement of its first dividend. This positive response may reflect investor optimism about the company's revenue growth and effective cost management. Similarly, Microsoft reported strong earnings, fueled by its investments in AI and cloud computing, signaling potential growth in this sector.

  3. Snap Inc. Outperforms Expectations: Snap’s shares also jumped after the company reported revenue and daily active user numbers that beat analyst predictions, offering some reassurance after Meta Platforms’ results suggested potential revenue hits due to increased AI investment.

  4. Inflation Data Anticipated: The upcoming release of the March PCE price index is highly anticipated as it may influence the Fed's monetary policy decisions. Although the overall measure is expected to stay consistent, any deviations could alter expectations for interest rate movements.

  5. Oil Prices Looking Up: Oil prices have seen a slight increase and are on track for a positive week despite the overhanging uncertainty about inflation data, which could impact interest rate decisions and, consequently, economic activity.

Investors seem to be cautiously optimistic as they await the latest inflation figures, which could provide clearer signals about the Federal Reserve's direction. Meanwhile, tech stocks, especially those involved in AI and cloud computing, seem to be regaining some footing after a challenging period, possibly pointing to a sector-specific recovery.

Gold Price retreats as inflation expectation rises and ease of middle east tension

04/22/2024 10:30 am EST


The gold market (XAU/USD) has seen a notable decline, dipping to $2,330 after previously approaching all-time highs around $2,430. This movement comes as demand for safe-haven assets lessens, with the easing of Middle East tensions between Iran and Israel providing some relief to markets. Furthermore, the sentiment around gold is affected by the market's reduced expectations for rate cuts by the Federal Reserve in the upcoming June and July meetings.

The 10-year US Treasury yields have risen to 4.66%, indicating increased investor confidence and a move away from safe assets like US bonds. This is a result of a growing belief that the Fed may be slower to pivot to rate cuts compared to other central banks. The rise in yields puts pressure on non-yielding assets like gold, which become less attractive to investors seeking returns.

Upcoming data on the US core Personal Consumption Expenditure Price Index for March will be a significant indicator that could influence bond yields and gold prices. The PCE is the Fed's preferred measure of inflation and will help set expectations for when the central bank might begin reducing interest rates. Currently, markets are looking to the Fed's September meeting for potential rate cuts, according to the CME FedWatch tool.

The US Dollar Index is another factor to consider, as it reflects the dollar's strength against a basket of six major currencies and is currently consolidating around 106.00. Gold prices are often impacted by the dollar's value, with a stronger dollar typically suppressing gold prices.

Investors are also anticipating the preliminary Q1 Gross Domestic Product (GDP) data, expected to show an expansion of 2.5%. If this growth materializes, it could indicate strong consumer spending and production, potentially leading to more price pressures and giving the Fed room to maintain current interest rates, which would bolster the demand for the US dollar.

The technical analysis suggests that the recent drop in gold price to $2,330 might be a correction rather than a bearish trend reversal. The yellow metal is anticipated to converge to the 20-day Exponential Moving Average at $2,315, which is a typical pattern after a sharp rally. Key support levels to watch are the April 5 low near $2,268 and the March 21 high at $2,223. The 14-period Relative Strength Index has cooled to 64.40, stepping back from the overbought territory, and the outlook for gold remains strong if the RSI settles in the bullish range of 60.00-80.00.

US Stock attempts to retrieve lost ground after sold off on last Friday

04/22/2024 10:00 am EST

U.S. stock markets saw a rebound on Monday after experiencing significant losses in the preceding two weeks. The technology sector was particularly affected, with the prospect of interest rate cuts by the Federal Reserve being pushed back due to persistent inflation. The tech sector will remain under close scrutiny this week with key earnings reports on the horizon.

Key tech companies, part of the group often referred to as the Magnificent Seven, are scheduled to report their earnings, which includes Tesla, Meta Platforms, Microsoft, and Alphabet. Tesla's stock experienced a decline as it announced price cuts that could signal the beginning of a price war in the electric vehicle market.

Verizon's stock saw an uptick after reporting fewer-than-expected subscriber losses, attributed to the appeal of their flexible plans and streaming bundles. Salesforce also saw its stock rise after stepping back from acquisition talks with Informatica, which failed due to an inability to agree on the terms.

Market participants are also anticipating other economic indicators such as the Purchasing Managers Index (PMI) and the Personal Consumption Expenditures (PCE) price index, which is the Federal Reserve's preferred inflation measure. These will provide further insights into U.S. business activities and inflation trends.

In the commodities market, crude oil prices have declined, partly due to the easing of tensions in the Middle East which reduces the likelihood of supply disruptions. Additionally, the International Monetary Fund's report suggesting that OPEC+ may increase oil output from July, alongside rising U.S. crude inventories, has also influenced crude prices. OPEC+ has been maintaining voluntary output cuts, which are set to continue until the end of June.

Stock Indices Performances, week of April 20th 2024

04/20/2024 03:45 pm EST

The chart of the S&P 500 index shows signs that could be interpreted with bearish sentiment, despite a year-to-date gain of 4.73%. The index has fallen to 4,967.23, down from its peak earlier in the year.

From a bearish perspective, the chart indicates that after reaching a level above the 5,000 mark, the index has been experiencing a decline, with a particularly steep drop as of the latest data point. This could be seen as a reversal of the positive trend that was in place, possibly suggesting that the market is losing steam.

The day's trading opened above the 5,000 level at 5,005.44, with a high of 5,019.02, yet the close was significantly lower, emphasizing a substantial intraday sell-off. This decline, especially when viewed against the backdrop of the recent high of 5,264.85, could give bears a reason to suspect that the market is entering a corrective phase or responding to negative catalysts.

Investors with a bearish outlook might consider this downturn a confirmation of their stance, potentially indicative of an upcoming trend of bearish market conditions. The near-term future could see heightened caution as investors look for further signs of market direction.

For Dow Jones Index, despite a year-to-date gain of 0.72%, the recent performance suggests a downturn. The chart shows the index peaking earlier in the year, with a notable decline leading into April. The late surge to 37,986.40 does little to offset the downward trend experienced since the high in February.

The trading activity on the displayed date started with an opening at 37,801.98 and reached a high of 38,102.57, but the proximity of the close to the day's low at 37,781.61 could indicate a loss of momentum and investor confidence. Moreover, the index's performance is evidently off from its 52-week high of 39,889.05, marking a retreat from those levels. This pullback may concern investors looking at the 52-week range, with the current level showing a stark contrast to the yearly high.

The decline may raise apprehension about the potential for further erosion in value, suggesting that bearish sentiment is currently prevalent among investors. This could be interpreted as a signal to proceed with caution, as it reflects a market that may be in the midst of a correction or on the cusp of a more prolonged bearish phase.

The Nasdaq Composite index chart shows a notable downturn and raising concerns of bearish sentiment. Despite an overall year-to-date gain of 3.50%, the recent sharp drop suggests a shift in investor sentiment toward caution and risk aversion.

The index, which had been trending at elevated levels through February and March, has experienced a steep decline as it approaches mid-April, falling to 15,282.01. This downturn, especially when contrasted with the previous steady rise, might indicate underlying market anxiety or a reaction to negative economic or business news impacting the tech sector, which heavily influences the Nasdaq.

The trading details for the day, with the market opening at 15,547.10 and reaching a low of 15,222.78, point to significant selling pressure. Moreover, the closing figure is considerably lower than the previous close, accentuating the bearish momentum.

This pullback from near the 52-week high of 16,538.86 towards the current value could be seen as a warning sign of potential volatility or a corrective phase in the market. Investors interpreting this chart with a bearish perspective may consider this an indication of the need for caution, anticipating the possibility of further declines if this trend persists.

Netflix down as growth expectation slows down

04/19/2024 03:45 pm EST


Netflix's recent announcement to discontinue reporting subscriber numbers by 2025 has generated concerns among investors regarding the company's future growth trajectory. This decision led to a significant drop in Netflix's stock price, as the move to focus on revenue and profitability rather than subscriber additions marks a significant shift in how the company's performance is measured.

The decision might influence other major players in the streaming industry, such as Walt Disney and Warner Bros Discovery, to reconsider the metrics they emphasize in financial disclosures. This potential industry-wide shift could reshape how investors and analysts assess the health and competitiveness of streaming companies.

Netflix's strategy change comes amidst a slowdown in subscriber growth in the U.S., suggesting a possible saturation in the market. The company's recent password-sharing crackdown contributed to a substantial increase in subscribers, but concerns linger about sustaining growth as the market matures.

To drive future growth, Netflix is exploring diversification of content and expanding its advertising business. The potential bid for NBA media rights signals a strategic pivot towards integrating more live sports content, which could attract a new audience and boost engagement. This move would align Netflix more directly with traditional and sports-focused broadcasters, potentially transforming its role in the streaming landscape and its appeal to a broader viewer base.

Stock Market Updates April 19th 2024

04/19/2024 03:40 pm EST


The recent mixed performance of U.S. stocks reflects the complex interplay of various economic and geopolitical factors affecting investor sentiment. On Friday, while the Dow Jones Industrial Average managed a modest gain, both the S&P 500 and the Nasdaq Composite experienced losses. This divergence highlights the particular pressure on the technology sector, which has been sensitive to earnings expectations and central bank policies.

Treasury yields saw a slight decline, indicating a shift toward safe-haven assets amidst ongoing tensions in the Middle East and uncertain economic forecasts. This shift is also mirrored in the strengthening of traditional safe-haven currencies like the Japanese yen and the Swiss Franc, and in the rising prices of gold, which marked its fifth consecutive weekly gain.

The backdrop to these market movements includes escalating tensions in the Middle East, particularly concerning Israel and Iran, which continue to influence global market dynamics. Despite a momentary de-escalation, the potential for further conflict remains a concern for investors.

In addition to geopolitical tensions, the economic landscape is being shaped by the Federal Reserve's current restrictive policy stance, aimed at controlling inflation, which remains above the target. The market's reaction to these policies is cautious, with expectations for interest rate cuts being pushed back.

As investors navigate these uncertainties, the impact is felt across global markets, with European and Asian stocks also experiencing downturns. The overall global economic sentiment appears cautious, reflecting the interconnectedness of geopolitical strife, monetary policy, and corporate earnings in shaping market dynamics.

Highlights of Stock Market on April 17th 2024

04/17/2024 04:00 pm EST

The summary of the stock market activity you've described points to a cautious and somewhat bearish sentiment among investors. Here are the key takeaways:

  1. Major Indexes Closed Lower: Despite rallying from session lows, all major indexes closed in negative territory. The Dow Jones Industrial Average slightly down by 0.1%, continuing a trend of losses in recent sessions.

  2. NASDAQ and S&P 500 Struggles: The Nasdaq dropped by 1.2%, with the S&P 500 also down by 0.6%. Both have seen several consecutive days of losses.

  3. Yield on Treasury Notes: The yield on the 10-year Treasury note dropped significantly, indicating that investors might be moving towards safer assets.

  4. Bitcoin's Steady Price: Bitcoin held its ground around $61,000, potentially in anticipation of its halving event.

  5. Individual Company Movements:

    • Travelers (TRV) fell after missing earnings expectations.

    • Apple (AAPL) saw a modest reversal amid news of potential manufacturing in Indonesia.

    • United Airlines (UAL) surged after reporting lower-than-expected losses.

  6. Tesla's Stock Movements: Tesla saw a slight loss as the board planned a vote on reinstating Elon Musk's significant pay package and potentially incorporating in Texas.

  7. Pharmaceutical and Retail Stocks:

    • Eli Lilly (LLY) experienced a minor gain on positive drug findings.

    • Children's Place (PLCE) jumped on securing a new loan.

Overall, the day's activity shows that investors are trading cautiously amidst mixed corporate earnings reports, potential changes in Federal Reserve policy, and overall market volatility.

Fed signals higher for longer interest rate path as inflation stays high

04/17/2024 09:00 am EST


Federal Reserve Chairman Jerome Powell recently addressed the current economic conditions at the Wilson Center’s Washington Forum on the Canadian Economy, providing key insights into the Fed's outlook on inflation and interest rates. Powell emphasized that recent inflation data have not bolstered confidence in reducing interest rates and suggested that it’s likely to take longer than anticipated to reach a position where cuts could be considered. This implies that the Fed may maintain higher interest rates for an extended period to ensure inflation returns sustainably to its 2% target.

Powell acknowledged the possibility of rate hikes up to 6.5% next year if economic conditions demand such measures, although he noted that this is not the baseline scenario. He reassured that the Fed's policies are well-equipped to manage potential risks, despite ongoing challenges with persistent inflation.

On the labor market front, Powell noted improvements in workforce balance, supported by increased labor force participation and immigration, which have helped meet the strong demand for workers. However, he also mentioned that the Fed retains the flexibility to lower rates if significant deterioration in the labor market occurs. Overall, Powell's comments reflect a cautious but adaptable approach to future monetary policy, with a focus on closely monitoring economic data to guide decisions.

Geo-political pressure and inflation re-acceleration causes stock market rally to stall

04/16/2024 15:00 pm EST

Following major movements are impacting the stock market trends:

  1. Powell's Remarks on Interest Rates: Federal Reserve Chairman Jerome Powell's comments suggest a more prolonged period of restrictive monetary policy than the market anticipated. His remarks indicate that the Fed is not in a hurry to cut interest rates, given the strong labor market and the progress on inflation control. This has adjusted market expectations, pushing the likelihood of an initial rate cut further back to September and casting doubt on the occurrence of a second cut.

  2. U.S. Stock Futures: Despite the bearish overtones from Powell's comments and recent market weaknesses, U.S. stock futures are pointing towards a positive opening. The Dow Jones Industrial Average's modest gains on Tuesday and expectations of more favorable earnings reports seem to provide some buoyancy. United Airlines' narrower loss and upbeat revenue report are contributing to this positive sentiment.

  3. ASML's Earnings Report: ASML's mixed quarterly report, with strong sales in China, keeps the year's financial outlook unchanged. The high proportion of sales in China raises questions about the potential impact of U.S. export restrictions, but ASML expects a surge in the second half of the year. ASML's position as a leading supplier for semiconductor manufacturing tools makes its performance particularly noteworthy for the tech sector.

  4. U.K. Inflation and Interest Rates: The U.K.'s CPI slowing more than expected could signal a shift towards potential interest rate cuts by the Bank of England, aligning with Governor Andrew Bailey's observations that the economy is reaching a point where cuts may be initiated. Market traders anticipate the Bank of England might begin reducing interest rates around August or September.

  5. Oil Prices and Global Demand: Crude oil prices are on the decline after an unexpected rise in U.S. stockpiles and indications of slowing economic momentum in China, which counteracted fears of supply disruptions due to tensions in the Middle East. The growth in U.S. stockpiles is attributed to continued high production levels. Oil prices are highly sensitive to shifts in global demand and geopolitical developments, so upcoming official U.S. inventory data will be closely watched.

In essence, the market is digesting various inputs: anticipatory central bank policies, corporate earnings, global economic indicators, and geopolitical factors. Each plays a role in shaping investor expectations and market trends. The interplay between these factors will continue to influence the financial landscape as more data becomes available.

Cryptocurrencies experienced selloff after news on Iran’s drone attack on Israel

04/14/2024 09:00 am EST

The news highlights a dynamic response in the cryptocurrency market to geopolitical tensions, as illustrated by the impact of Iran's attack on Israel. The quick sell-off and subsequent partial recovery emphasize the sensitivity of cryptocurrencies to global events. Here are the key takeaways:

  • Immediate Reaction: Cryptocurrencies experienced a sharp sell-off following the Iran attack on Israel, with Bitcoin dropping 7% to just over $61,000.

  • Partial Recovery: By Sunday, cryptocurrencies began to stabilize and reclaim some of their lost ground. Bitcoin was trading flat at around $64,771, and Ethereum was up by 1.6% at $2,960.

  • Comparison to Previous Levels: Despite the recovery, both Bitcoin and Ethereum were trading below the higher levels seen on Friday, before the attack, when Bitcoin was above $71,000 and Ethereum was at the $3,500 mark.

  • Market Sentiment Gauge: The cryptocurrency market's immediate reaction to the attack may serve as a gauge of market sentiment, especially during times when traditional financial markets are closed and cannot respond to geopolitical developments.

  • Overall Market Impact: According to CoinMarketCap, the global crypto market fell by 9% on Saturday following the news of the attack, highlighting the market's volatility and the rapid influence of international incidents.

The cryptocurrency market is known for its volatility and its trading availability 24/7, which can often make it an early indicator of investor sentiment in response to global events. This market behavior once again underscores the interconnectedness of geopolitics and financial markets, with cryptocurrency acting as a real-time reflection of investor sentiment during times of crisis.

US market dropped on Friday April 12th after mixed earnings and JP Morgan declined in net interest income

04/12/2024 03:00 pm EST

The U.S. stock market experienced a significant downturn on Friday, influenced by several factors:

  1. Mixed Earnings Reports: The start of the earnings reporting season has brought mixed results, which can cause uncertainty and lead to market volatility. While some companies may report strong profits, their forecasts for future earnings or other financial metrics can disappoint investors.

  2. Geopolitical Tensions: Increasing tensions in the Middle East have heightened concerns among investors, prompting a shift towards safer investments. Such geopolitical events can cause widespread worry that impacts market stability.

  3. Market Indicators:

    • The S&P 500 dropped by 1.5%, marking its worst week since a significant rally began in October.

    • The Dow Jones Industrial Average fell by 475 points, or 1.2%.

    • The Nasdaq composite decreased by 1.6% from its record high the previous day.

  4. Impact of Individual Companies: JPMorgan Chase, as a major financial institution, had a significant negative impact on the market, dropping 6.5% after its earnings report. The bank's forecast for a key source of income was lower than what analysts expected, contributing to market concerns.

  5. Profit Expectations: There's high pressure on companies to deliver strong profit growth, which is challenging if the other factors affecting stock prices, like interest rates, don't provide support.

  6. Interest Rate Outlook: Recent reports showing persistent inflation and a robust economy have led traders to adjust their expectations for interest rate cuts by the Federal Reserve. There's a prediction for fewer rate cuts than initially expected at the beginning of the year, which could mean higher borrowing costs for businesses and consumers in the future.

Overall, the market's response reflects a combination of corporate performance and broader economic indicators. Investors are recalibrating their expectations for corporate earnings growth against the backdrop of a potentially shifting interest rate environment and the risks posed by geopolitical uncertainties.

US futures rise after PPI and unemployment claim rise

04/10/2024 09:00 am EST

The latest reports on the U.S. Producer Price Index (PPI) and unemployment claims have brought a nuanced perspective to the markets. The PPI's smaller-than-anticipated increase suggests that inflation at the wholesale level isn't accelerating as quickly as some feared. This is significant because it can be an indicator of future consumer price trends. If producer prices are not rising as rapidly, it may mean less pressure on consumer prices down the line, hence the positive reaction from investors who might see this as a sign that the Federal Reserve could consider interest rate cuts.

The weekly unemployment claims being slightly lower than expected is another positive signal, indicating continued strength in the labor market. However, these numbers are still very close to estimates, which likely means that this data alone wouldn't lead to a major market shift.

The response in stock index futures, with only modest declines in the Dow and S&P 500 and a slight uptick in the Nasdaq, suggests that investors are cautiously optimistic, or at least not as concerned about runaway inflation as they might have been. These futures are a contract to buy or sell the underlying stock index at a predetermined price on a specific date, and movements in these prices can indicate investor sentiment about the direction of the market.

This tempered response — a small decrease in Dow and S&P futures and a slight increase in Nasdaq futures — indicates a mixed but stabilizing sentiment among investors as they process the implications of the economic data. The minor decrease in Dow and S&P e-minis might reflect lingering concerns among some investors about the economy's direction, while the increase in Nasdaq 100 e-minis could suggest a more optimistic view among tech investors or a belief that tech stocks may be better positioned in the current economic environment.

Treasury yields increased after hot CPI Report

04/09/2024 10:15 am EST


Today's Consumer Price Index (CPI) report has evidently had a significant impact on the U.S. Treasury market, driving yields sharply higher as bond prices fell. The increase in both headline and core inflation undermines the idea that earlier inflationary signals were mere anomalies. Such data suggest sustained inflationary pressures rather than transitory effects, prompting a reevaluation of the economic outlook.

The spike in the 10-year Treasury yield by about 14 basis points to 4.49% is a clear market reaction to the CPI report, as higher inflation typically leads to expectations of tighter monetary policy. The bond market is sensitive to inflation because it erodes the real return on fixed-income investments, leading investors to demand higher yields as compensation.

The drop in Treasury prices this month, as noted by RBC, and the potential for further losses following the CPI report, reflects a recalibration of risk and return expectations among investors. With the Fed funds futures market now indicating only a 20% chance of a rate cut by June and two cuts fully priced in for 2024, it’s evident that the market is tempering its expectations for monetary easing.

The forthcoming Fed minutes will be closely scrutinized for additional insights into the Federal Reserve's stance. Any indication of a hawkish tilt or reluctance to cut rates could reinforce today's bond market movements. Moreover, clarity on the timing of the Federal Reserve's quantitative tightening—reducing the central bank's balance sheet—will also be crucial for investors. The start of quantitative tightening can put upward pressure on yields as it implies less demand for bonds from one of the market's major buyers.

Fed speakers' recent comments against the likelihood of multiple rate cuts this year further align with today's CPI data, indicating that the central bank is conscious of persistent inflation and may not be as quick to lower rates as some might hope. Market participants will likely end the day with a better understanding of the Federal Reserve's policy trajectory and the implications of sustained inflation on future monetary policy.

Gold continues to climb as economy forecast stays uncertain due to inflation and Fed decisions

04/10/2024 09:45 am EST


Gold prices reaching near record highs in Asian trade and the surge in industrial metals like copper are indicative of a complex interplay between economic expectations and market behavior.

Gold's Rally: The increase in gold prices is a classic market response to uncertainty and the anticipation of inflation data. Gold is traditionally seen as a safe haven asset, so when investors are nervous about the economic outlook or potential market volatility, they often turn to gold. The mention of central bank buying, particularly by the People's Bank of China (PBOC), adds another layer to this narrative, as central banks are substantial players in the gold market. Their activity often reflects broader strategic economic maneuvers, in this case, potentially hedging against economic slowdown and domestic market volatility.

CPI Data and Rate Cuts: The expected U.S. CPI data is a critical factor for the market. If inflation remains high (sticky), it would likely diminish the prospects of the Federal Reserve cutting interest rates. Higher interest rates typically strengthen the currency and can reduce the appeal of non-yielding assets like gold. However, the safe-haven demand for gold may be balancing out this effect, as investors weigh the risks of inflation against the potential for economic downturns.

Industrial Metals and Economic Recovery: The peak in copper prices reflects optimism about a rebound in global manufacturing activity. Copper is often seen as a barometer for industrial health because of its widespread use. Tighter supply predictions and the potential for increased demand as economies recover from the downturn are driving copper prices up.

Economic Signals from China: The reference to China’s role as the world's biggest copper importer and the anticipation of its economic data indicate that the country's economic health is crucial to global commodity markets. Signs of a strong recovery or further stimulus measures can boost demand for copper, hence lifting prices.

Precious Metals' Mixed Response: The varied reaction across precious metals, with platinum and silver also experiencing price increases, points to a broader trend of investment in tangible assets during times of uncertainty.

Overall, these market movements underscore a cautious yet hopeful outlook among investors, balancing fears of an economic slowdown with the promise of recovery. Gold's gains, despite concerns over potential continued high U.S. interest rates, demonstrate its role as a hedge against uncertainty, while the surge in copper prices speaks to a cautiously optimistic view on global economic recovery.

Mixed market performance in indices show investors’ uncertainty ahead of inflation report on Wednesday

04/09/2024 06:30 pm EST

The stock market's performance had a day of mixed results with minor fluctuations, raising caution ahead of significant economic data releases such as inflation report:

  1. Stock Market Movements: The modest gains in the S&P 500 and NASDAQ Composite, contrasted with the slight decline in the Dow Jones Industrial Average, reflect a market experiencing some uncertainty. This kind of mixed closing is not uncommon when investors are weighing different factors and awaiting new information that could impact the market.

  2. Tech Sector Performance: Nvidia's decline points to the influence of technical levels and competitive pressures on individual stock prices. In contrast, Alphabet's gains following its announcements show how news of product innovation and partnerships can buoy a stock. The tech sector remains sensitive to such news, which can lead to volatility within the industry.

  3. Upcoming CPI Data and Fed Minutes: With inflation data and Federal Reserve minutes on the horizon, the market is clearly in a holding pattern. Investors are looking for indications of whether inflation is indeed cooling, which could influence the Fed's rate decisions. These pieces of economic data are pivotal for setting the tone in the market, as they directly impact expectations around interest rates and monetary policy.

  4. Treasury Yields: The slight drop in Treasury yields may be an early reaction to the anticipation of the CPI data, with investors possibly seeking safer assets in the face of uncertainty about inflation and the Fed's subsequent actions.

  5. Boeing's Troubles: The news about Boeing's regulatory scrutiny adds to the company's ongoing challenges, which appear to be affecting investor confidence and its stock price, as well as impacting its operational output as seen in the Q1 delivery numbers.

  6. Lucid Group's Deliveries: Lucid's reported delivery numbers that surpassed expectations could be contributing to positive sentiment around the stock, showcasing the demand for electric vehicles and how strategic pricing can play a role in sales.

  7. Financial Sector and Earnings Season: With the financial sector showing some downward movement, there seems to be a cautious stance from investors as they await earnings reports from major banks. These reports will be significant in assessing whether the financial sector can sustain the valuation increases it has seen over recent months.

  8. Market Sentiment: Overall, the market sentiment seems to be one of caution with a focus on upcoming economic data and earnings reports. These will likely give more direction to investors, with potential implications for the broader market, individual sectors, and investment strategies.

In conclusion, investors are bracing for a clearer picture of the economic landscape, which will be shaped by incoming inflation data, the details within the Fed minutes, and the Q1 earnings reports of major corporations.

World stocks mixed ahead of US inflation, metals soar

04/09/2024 10:10 am EST

The global stock markets are showing mixed signals as investors await new economic data and policy meetings that could shape expectations and strategies moving forward.

Below are the observations in today’s market:

  1. Mixed Global Shares: The STOXX 600 index saw a small decline, and Wall Street futures were relatively flat. This suggests investors are cautious, likely due to pending economic updates.

  2. Anticipation of U.S. Inflation Data: Investors are particularly focused on the upcoming U.S. inflation data. If inflation remains high, it might influence the Federal Reserve to reconsider the extent and pace of any future rate cuts.

  3. European Central Bank (ECB) Meeting: The market's attention in Europe is on the ECB meeting, with expectations that comments from President Christine Lagarde could provide indications of potential rate cuts in June.

  4. Interest Rates Expectations: There has been a recalibration of expectations regarding U.S. rate cuts. Initial expectations of more aggressive cuts have been scaled back in light of strong economic activity and persistent inflation.

  5. Bond Yields: German 10-year bund yields have shown some volatility, dipping after reaching a three-week high. Bond yields can be indicative of investor sentiment and expectations about future interest rates and economic growth.

  6. Currency Fluctuations: The yen has been under pressure due to the disparities in interest rates between Japan and other countries, with the Finance Minister indicating readiness to intervene to prevent excessive fluctuations.

  7. Industrial Metals Prices: Expectations of a manufacturing rebound worldwide have led to a rise in industrial metals prices, signaling optimism about global economic growth. This is further supported by positive manufacturing data from Germany, the U.S., and China.

  8. Gold Prices: Gold continues its record-breaking run, spurred by central bank purchases and geopolitical tensions. The sustained rally suggests that investors see gold as a hedge amid uncertainties.

Overall, investors seem to be in a wait-and-see mode, exercising caution ahead of key economic data and central bank meetings. The anticipation of this new information may lead to increased market volatility. Factors such as inflation data, central bank policies, and economic indicators will be critical in shaping the market's direction in the coming weeks.

Germany’s Housing Market experiencing a challenging environment

04/08/2024 03:41 pm EST

Germany's economy, renowned for its robust industrial sector and high standards of living, is facing a significant challenge due to the shift in its housing market dynamics. The period of low interest rates that Germany, much like the rest of the world, had experienced for years, led to an expansion in housing developments and an increase in borrowing by both consumers and developers. This scenario played out positively as long as the economic conditions, including interest rates, remained favorable.

However, post-pandemic inflation has pressured central banks globally, including the European Central Bank (ECB), to take a more hawkish stance on monetary policy, leading to increased interest rates. This shift is not without consequences. For Germany, it has resulted in reduced consumer demand for housing due to the higher costs associated with borrowing. Simultaneously, developers are facing elevated construction costs, further compounding the issue. This convergence of factors creates a challenging environment for the housing market, akin to the "perfect storm" that can strain financial models based on previous low-rate assumptions.

The decline in apartment prices in Germany, as seen from the third quarter of 2023, marks a significant turn for a sector that has been a cornerstone of the domestic economy. With developers committed to ongoing construction projects, the changing economic landscape can lead to cash flow issues, where the costs of completing these projects may outweigh the potential sales revenues in a down-trending market. The insolvency of several large developers is a stark indication of the severity of the situation.

This situation could have ripple effects across the broader economy. The real estate sector is often interlinked with various other sectors, including banking, construction, and retail. A downturn in the real estate market can lead to a contraction in these related sectors as well.

The concerns among economists regarding Germany's economy reflect the broader potential implications for the European Union, especially in the post-Brexit era where Germany's economic health is more crucial than ever. Policymakers and industry stakeholders will likely be closely monitoring the situation, seeking measures to stabilize the market, support struggling developers, and maintain consumer confidence amidst these challenging economic conditions.

Summary of Financial Market 04/08/2024

04/08/2024 11:30 am EST

  1. U.S. Treasury Yields: The 10-year Treasury yield has increased to 4.42%, which is near the highest levels since November and is approaching the 4.5% mark. This indicates a market adjustment in expectations around inflation and future interest rate movements. The anticipation of less aggressive rate cutting by the Federal Reserve—down from three to two quarter-point cuts this year—suggests a shift in market sentiment, possibly driven by stronger-than-expected economic data such as the robust jobs report. The yield movements also reflect a recalibration of risk, with traders factoring in less monetary easing than previously priced in.

  2. Inflation and CPI: The upcoming Consumer Price Index (CPI) data is key for investors as it will provide insight into inflation trends. With core inflation anticipated to be around 3.7% year-over-year, this is still above the Fed’s target of 2%. Persistent inflation could influence the Fed's timeline for interest rate adjustments.

  3. Stock Market: The S&P 500 hovering near 5,200 points indicates that the stock market is responding to a mix of factors, including corporate earnings expectations, geopolitical developments (like the situation in Gaza), and the latest economic data. Individual company performance, such as that of Nvidia and Tesla, shows a diverse impact on different sectors within the larger market.

  4. Cryptocurrency: Bitcoin's surge past $71,000 illustrates the continued volatility and investor interest in cryptocurrencies, despite broader market trends and regulatory scrutiny.

  5. Corporate News: The details provided on corporate developments, including Tesla's robotaxi plans and Blackstone's acquisition, demonstrate active strategic movements in various sectors, which have implications for investor sentiment and market dynamics.

  6. Semiconductor Manufacturing: The U.S. grant and loan commitments to TSMC underline the strategic importance of semiconductor manufacturing to national interests and technological leadership. It also reflects ongoing efforts to bolster domestic production capabilities.

  7. Global Events: The key events scheduled for the week, including central bank decisions and economic data releases from China, the Eurozone, and the U.S., are likely to provide further direction to global financial markets.

  8. Commodities: The decline in West Texas Intermediate crude prices and the slight dip in gold prices reflect the constantly changing landscape of commodity markets, often influenced by the dollar's strength, supply-demand dynamics, and investor risk appetites.

  9. Currencies and Bonds: The relative stability in major currency pairs against the dollar and the incremental movements in yields of major economies' bonds suggest a cautious market approach amidst various global uncertainties.

This financial update outlines a market characterized by caution due to inflation concerns, recalibration of interest rate expectations, and a close watch on corporate earnings and geopolitical events. Investors and policymakers alike are likely focused on the forthcoming CPI data as a key determinant of future economic policy and market direction.

TSMC looking to build a third plant in Arizona with support from the Biden Administration

04/08/2024 10:15 am EST

The Biden administration's decision to allocate up to $6.6 billion in federal grants to the Taiwan Semiconductor Manufacturing Company (TSMC) for its significant expansion in Arizona represents a pivotal moment in the U.S.'s strategy to revitalize domestic semiconductor manufacturing. This move, coupled with a previous grant of up to $8.5 billion to Intel, underscores a concerted effort under President Joe Biden's leadership to reclaim a leading role in the semiconductor industry, a sector crucial for technological advancement and national security.

The funding, sourced from the 2022 CHIPs and Science law, aims to support the construction of TSMC's manufacturing plants in Phoenix, marking a significant investment in the U.S.'s manufacturing capabilities. TSMC's commitment to build a third facility in Arizona, bringing the total investment in the state to over $65 billion, signals a robust partnership between the U.S. government and the semiconductor giant. This collaboration is not just about enhancing the U.S.'s manufacturing prowess but also about securing the supply chain for critical components essential for the technology underpinning the modern economy.

Commerce Secretary Gina Raimondo's remarks highlight the strategic importance of these initiatives, emphasizing that the advanced chips produced by these plants are foundational to artificial intelligence and vital for the technological infrastructure necessary for economic competitiveness.

The inclusion of workforce development funding and potential government loans illustrates a comprehensive approach to not only bolster manufacturing capacity but also address labor market challenges. The acknowledgment of worker shortages and the reliance on foreign expertise, particularly from Taiwan, during the initial phases of construction reveals the complexities of scaling up high-tech manufacturing capabilities in the U.S.

TSMC's expansion, described as the largest foreign direct investment in a new project in U.S. history, is expected to create thousands of direct and indirect jobs, catalyzing further economic activity and enhancing the U.S.'s competitive edge in the semiconductor sector. The administration's vision of the U.S. producing 20% of the world's most advanced semiconductor chips by the end of the decade is ambitious, given the current state of domestic production. However, the significant investments and strategic partnerships forged under the CHIPs and Science law represent critical steps toward achieving this goal.

This initiative reflects a broader strategic pivot toward strengthening domestic industries critical to national security and economic prosperity, signaling a renewed emphasis on manufacturing and technological leadership in the global arena.

TSM stock price reaches $145.14 on 04/08/2024 10:30am.

Middle East Ceasefire Talks Stabilize Oil Prices

04/08/2024 10:00 am EST


The oil market's response to geopolitical developments, as outlined in the Reuters report, highlights the intricate relationship between global events and energy pricing. The steadying of Brent crude above $91, after initial losses sparked by Israel's military actions in Gaza and the ongoing ceasefire talks, underscores the market's sensitivity to geopolitical tensions. These fluctuations, closely tied to the dynamics between Israel and Gaza and the broader Middle East conflict, reflect investors' reactions to potential impacts on oil supply security.

The nuanced market reaction also considers the economic indicators, like the U.S. employment report, pointing to a solid economic footing that may influence the Federal Reserve's interest rate decisions. These macroeconomic elements, combined with geopolitical uncertainties, contribute to the market's cautious stance, with oil prices hovering around a critical threshold.

Jamie Dimon, CEO of JP Morgan Chase, warns risk of continuously high inflation and interest rates environment

04/08/2024 09:45 am EST

Jamie Dimon's latest annual letter to shareholders carries a sobering tone, highlighting the complexities of the current global situation. His decision to pivot from previous concerns like debt levels and quantitative tightening to the broader impacts of geopolitical and economic forces signifies a notable shift in focus. By characterizing the current geopolitical climate as potentially the most perilous since World War II, Dimon underscores the gravity of the challenges facing the global economy.

Dimon's emphasis on the unpredictable nature of these forces and their outcomes is a call for a cautious and flexible approach. His insistence on preparing for a range of potential scenarios, rather than relying on base case forecasts, reflects a pragmatic strategy in the face of uncertainty.

The factors identified by Dimon as driving inflation—fiscal spending, remilitarization, global trade restructuring, and the green economy's capital needs—paint a picture of a complex web of interlinked pressures. The comparison to the inflationary period of the 1970s and early 1980s, alongside the mention of today's unique circumstances like fiscal deficits and the scale of quantitative easing and its reversal, suggests a nuanced understanding of the inflationary risks ahead.

On the topic of AI, Dimon's acknowledgment of both the opportunities and risks associated with its advancement is significant. His assurance that JPMorgan is committed to maintaining a robust risk and control framework to manage AI-related risks reflects an understanding of the importance of staying ahead of technological and regulatory developments. His mention of ethical standards and transparency in AI's decision-making processes, alongside the concern over malicious use of AI, highlights the dual nature of technological advancements—offering both remarkable opportunities and significant challenges.

Overall, Dimon's letter serves as a cautionary note on the current state of the world, urging preparedness and adaptability in the face of significant and unpredictable global changes.

Gold continues to perform in recent week

04/07/2024 10:45pm EST

David Rosenberg, a renowned economist and president of Rosenberg Research, presents a bullish outlook for gold, forecasting its price could reach $3,000 per ounce before the next shift in the business cycle. This prediction marks a substantial 30% increase from current levels, following a historic peak of $2,328.7 per ounce last week. Rosenberg attributes this remarkable performance to several factors that typically would hinder gold's value but have instead propelled its surge. These include dollar strength, falling inflation expectations, and a market shift towards a "higher for longer" view on interest rates.

The recent surge in gold prices is driven more by increased demand than by supply changes. Central banks, particularly in nations wary of relying too heavily on the US dollar, have significantly boosted their gold reserves. This shift comes as the Chinese yuan loses its position as the world's second reserve currency, and countries like Japan, Russia, Turkey, and Poland seek more secure assets amidst unique economic risks. Central banks' renewed interest in gold is evidenced by their purchase of 361 tonnes in the third quarter of 2023, a dramatic increase from a divestment of 77 tonnes in the same period in 2022.

Additionally, gold's allure has grown in emerging markets such as India and China, while interest in Western markets has waned due to high interest rates and booming stock prices. The metal's industrial demand, particularly in electronics manufacturing for AI models, further supports its price.

Rosenberg also highlights the role of geopolitical risks and macroeconomic uncertainties in bolstering gold's appeal. With international relations trending towards militarization and polarization, gold's value as a hedge against risk has become more pronounced. Concerns over the US debt-to-GDP ratio and the potential for a fiscal crisis amid election uncertainties have also led investors to increase their gold holdings.

Looking forward, Rosenberg outlines two scenarios—a "soft landing" and a typical bear market—both suggesting significant upside for gold. In a soft landing, with global real interest rates returning to pre-2000 averages, gold could see about a 10% price increase. A recession scenario suggests a potential 15% increase, pushing gold into the $2,500 range.

Rosenberg's analysis indicates limited downside risk for gold, with considerable potential for price increases, particularly if geopolitical tensions escalate. He advises investors to include gold in their portfolios, emphasizing its significant upside amidst contained downside risks.

Recent trend in Gold

  1. Rising Trend: The gold price appears to be in a rising trend over the last three months, with prices increasing substantially towards the latest date on the chart.

  2. Price Fluctuations: There are points where the price fluctuates, which is normal for commodity markets. These could be due to a variety of factors such as changes in demand, shifts in global economic outlook, central bank policies, or geopolitical events.

  3. Sharp Increase: The sharp increase towards the end, reaching what appears to be over $2,300 per ounce, suggests a significant event or change in market conditions that has led to increased demand for gold or concerns about the stability of other investments.

Use of gold in market and economy

Inflation: Gold is often seen as a hedge against inflation. If inflation is rising or expected to rise, gold prices may increase as investors look for safe places to retain value.

Currency Values: The strength of the dollar typically moves inversely with the price of gold. If the dollar weakens, gold prices may rise as it becomes cheaper in other currencies, increasing demand.

Interest Rates: Lower interest rates can lead to higher gold prices as the opportunity cost of holding gold decreases. Higher rates could have the opposite effect.

Economic Uncertainty: During times of economic uncertainty or stock market volatility, investors may flock to gold as a safe haven, pushing prices up.

Central Bank Policies: Decisions by central banks to hold or sell gold can impact market perceptions and influence prices.

Supply and Demand: Market dynamics, including demand for jewelry and industrial use as well as mine production and disruptions, can cause price changes.

Oil Price surges back to $90 as OPEC+ promises to cut production

04/07/2024 10:45 pm EST


The recent surge in global oil prices, with Brent crude nearing $90 per barrel, underscores the complex interplay of supply and demand dynamics in the oil market.

Here are the main factors contributing to this situation:

  1. Supply and Demand Considerations: The ongoing rise in oil prices reflects several market factors, including geopolitical tensions, production decisions by major oil-exporting countries, and shifts in global demand.

  2. Geopolitical Tensions and Disruptions: Recent developments, such as continued turmoil in the Middle East, Ukrainian drone strikes on Russian refineries, and Mexico's decision to halt some crude exports in anticipation of a new refinery opening, have all contributed to concerns over supply disruptions.

  3. OPEC+ Production Cuts: A significant factor behind the current price levels is the production cuts enacted by the Organization of Petroleum Exporting Countries and its allies, collectively known as OPEC+. These cuts have reduced the supply of oil on the global market, supporting higher prices.

  4. OPEC+ Meeting and Decisions: The anticipation of the latest OPEC+ meeting adds to the market's uncertainty. While the group previously extended its production cuts to June, there's speculation that these cuts could remain in place for the rest of the year. OPEC+ plays a crucial role in global oil markets, producing about 40% of the world's oil and accounting for 60% of the petroleum traded internationally. Their decisions can dramatically influence global oil prices.

  5. Global Supply Shortfalls: The International Energy Agency has indicated that global oil supplies could fall short of demand by 300,000 barrels per day this year. Such a shortfall could further exacerbate price increases if demand continues to outpace supply.

  6. OPEC+'s Current Production Stance: Despite the tightening market, OPEC+ reportedly plans to maintain its production cut of 2.2 million barrels per day, further contributing to the supply constraints and upward pressure on prices.

The combination of geopolitical disruptions, strategic production cuts by major exporters, and evolving global demand patterns are contributing to the current surge in oil prices.

The decisions made by OPEC+ in the upcoming meetings will be closely watched for their potential impact on future supply and price trends. The decision to continue to cut production is likely to reignite the velocity of inflation in the global economies.