This week brings the U.S. jobs reports, which will be crucial for the Fed’s next interest rate decision. The labor market has evolved into a curious scenario where employers are neither hiring nor firing many workers. The ratio of job openings…
RECAPPING LAST WEEK
U.S equities rose modestly in a shortened Thanksgiving week as technology and retail stocks buoyed markets. The S&P500, Nasdaq Composite, and Russell 2000 indexes all rose 1% with the S&P500 and Russell advancing to new record closes. While U.S. equity indexes have risen in November in spite of rising U.S. Treasury yields and a stronger U.S. dollar, both eased back through support last week, giving equities an extra boost. Their rise has been progressing since the September Fed meeting and rallied right up to major technical resistance, but it took news of President Elect Trump’s pick for the Treasury, Scott Bessent, to finally break it.
Ten of eleven S&P500 sectors were positive last week except for energy, which was surprisingly unable to rally after a ceasefire between Israel and Hezbollah militants in Lebanon was agreed upon, reducing uncertainty in the region and putting downward pressure oil prices as well as precious metals and Bitcoin. The Fed helped stall that fall by expressing confidence on easing inflation and a strong labor market indicating further rate cuts are likely.
While metals, oil and Bitcoin all recovered from Monday’s drop, Bitcoin sprung back viciously, rising to a new all-time high, with futures surpassing $100k. U.S. Core PCE increased 0.2% showing a 12-month inflation rate of 2.3%, in line with expectations, although higher than September’s 2.1% rates. Personal income jumped 0.6% vs 0.3% expectation along with jobless claims dropping 2,000 to 213K. The CME Group’s FedWatch tool puts odds of another quarter point cut in December at 66%.
U.S. Durable goods orders rose for the first time in 3 months, gaining 0.2%, while the second estimate of Q3 GDP held steady at 2.8% growth, powered by 3.5% in consumer spending. It makes sense then that consumer confidence improved again to 111.7 from an upwardly revised 109.6 in October.
Optimism about future job availability reached its highest level in three years. The Richmond
Manufacturing index was a blip of negative news staying put at -14. Housing data was mixed as the
S&P Case-Shiller House Price Index showed a slight decrease in sale prices over 20 metropolitan
areas, down to 4.6% vs 4.7% expectations and 5.2% prior. New home sales dropped 17% last month, largely affected by the two southern Hurricanes. However, pending home sales rose to a seven month high as lower mortgage rates enticed buyers. Still, the supply of previously owned homes is at a four year high. Things weren’t quite as rosy overseas as German business morale fell more than expected in the ifo Biz Climate survey, and CPI increased to 2.2% from 2% in October. The Gfk Consumer Climate also declined from -18.4 to -23.3, and retail sales dropped by 1.5%. Eurozone inflation rose as well, coming it at 2.3% vs 2% in October. It’s the same story on the other side of the world with Tokyo’s core CPI rising 2.2% as well, up from 1.8% in October. The BOJ Core CPI came in at 1.5% vs 1.8% expectations, potentially influencing the BOJ’s monetary policy stance. In other news Australia’s CPI came in 2.1%, below forecast of 2.3%, and Canada’s GDP rose a measly 0.1% in September.
THE WEEK AHEAD
This week brings the U.S. jobs reports, which will be crucial for the Fed’s next interest rate decision.
The labor market has evolved into a curious scenario where employers are neither hiring nor firing
many workers. The ratio of job openings to unemployed workers is nearly one-to-one, down from two-to-one in 2022, while the quits rate has plummeted. Initial jobless claims remain low, but continuing claims are on the rise, suggesting jobs are not plentiful. All these data points get a refresh this week, including nonfarm payrolls, which were already declining before October’s abysmal reading. That number was distorted by the hurricanes and Boeing strike and could be revised higher, but the November data may reveal an uptick in the unemployment rate for the first time since August.
ISM manufacturing and services PMIs, consumer sentiment, and factory orders round out the domestic agenda. OPEC ministers were facing some tough choices going into yesterday’s meeting. With global energy demand slowing and supplies growing in the U.S., the organization may have to curb production well into 2025 or face further downward pressure on prices. The International Energy Agency has forecasted an oil surplus for next year, even if already-postponed production hikes are cancelled entirely.
The international economic calendar lacks top-tier data, but a few releases merit attention. China’s Caixin PMI surveys follow the official government PMIs from last Friday evening, and trade balance figures from November are expected sometime this week. In Europe, investors will parse through Germany’s industrial production and factory orders along with PPI and retail sales from the broader EU.
(source: Schwab)
