Jobless Claims were below Expectations

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It’s a veritable cornucopia of new economic prints ahead of today’s opening bell, less than a full day after the latest Fed funds interest rate hike, which brought its level to 4.25-4.50% (the first time over 4% in 15 years). The 50 bps hike, which was previously +75 bps for the past 4 months, was reduced to 50% for the first time in 5 month. The dot-plot going forward does not see any 75 bps hikes on the horizon; the Fed’s actions in this regard have peaked.

Initial Jobless Claims The number of 211K came in lower than expected. It was about -20K less than the week before. This is the lowest level of new jobless claims since autumn began. The holiday Retail and Warehouse industries might be distorting the claims slightly due to routine seasonality, however, it still points to healthy labor market conditions as highlighted by the Fed yesterday. The number of continuing claims was flat at 1.67million.

Retail Sales for November swung to a deeper negative number than expected this morning: -0.6% doubled the consensus -0.3%, and a big drop from October’s reported +1.3%. This is the lowest negative print since mid-summer. It also marks the worst reading since December 2021. Furniture, Building Materials and Motor Vehicles are all feeling more than -22% for the month. In addition, Black Friday and Cyber Tuesday totals indicate weaker consumer spending.

Ex-motor vehicles, ex-autos and gas and the Control numbers all came in the same: -0.2% for last month, again the first negative levels since July of this year and the weakest numbers since December ’22. So even with these carve-outs, we’re still seeing relative weakness in retail sales — at least as of the early weeks of holiday shopping season. Likely we’re seeing further affects of higher interest rates from the Fed over time.

Empire State manufacturing for December dropped to its weakest levels since August, -11.2 (more than double the -0.5 expected), and another swing to the negative from November’s +4.5. December’s GDP was $11.2. This is more than twice the -0.5 expected. Another swing to the negative from November’s +4.5. Philly Fed Although read improved month-over-month, it was still below what we expected: -13.8. The previous month’s -19.4 remains the lowest post of the past 12 months. Manufacturing demand appears to be decreasing slightly, too.

This will be our focus for the next few economic reports and later Q4 earnings seasons, which heat up in January. Plenty of data will have been released prior to the Fed’s next monetary policy decision on February 1st of next year. Currently, the Fed is preparing a 5.00-5.25 Fed funds rate range. We might also expect a new hike at the meeting unless we get some particularly significant numbers between now, and then.

Pre-market futures are lower on this morning’s data, with the Dow -350 points, the S&P 500 -50 and the Nasdaq -175 points. These add onto yesterday afternoon’s losses, when markets sank into the red after the Fed funds decision and longer, danker dot-plot were reported. We’ll get a new PCE report before Christmas, but most of the important economic news for our current month has already been reported.

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