Recently released data has been consistent with a theme of stronger than expected growth, sticky inflation and yields possibly staying higher for longer than many had anticipated. Moreover, many want clarity on which policies President-Elect Trump will actually through, policies on tariffs, taxes and immigration.
Commenting on yesterday’s data, weekly unemployment claims fell to the lowest level since May, indicating there is still a healthy demand for workers. Weekly claims are notoriously volatile. The four-week moving average of new applications, a metric that helps smooth out volatility, is at the lowest level since May.
The PPI was also nominally higher than expected, offering further evidence of a lack of further inflationary headway.
The Treasury market was quietly volatile. A Bloomberg index of total Treasury returns (includes interest paid) is at the cusp of going negative for the year, posting a 0.63% YTD return. This gauge was posting a total return of about 4.6% as of September 17 when the benchmark 10-year yield hit its lowest of the year at 3.6%.
Late in the afternoon, FRB Chair Powell stated “recent performance of the economy has been remarkably good and not sending any signals that we need to be in a hurry to lower rates.” Because of this statement, futures markets are now only suggesting a 55% chance of a quarter point reduction at the December meeting, moderately lower than the previous day’s odds of 80%.
What will happen today? Retail sales and import/export price indices are released.
Last night the foreign markets were mixed. London was up 0.14%, Paris down 0.08% and Frankfurt down 0.07%. Chian was down 1.45%, Japan up 0.28% and Hang Seng down 0.05%.
Futures are bifurcated as Dow futures are down 0.20% and NASDAQ down 0.80%. The 10-year is up 1/32 to yield 4.43%.
