Thursday data roundup: Fed hangover

Reuters

Thursday data roundup: Fed hangover

19. Sep. 2024 um 2:51 nachm. GMT

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Main U.S. indexes rally, Nasdaq up >2.5%

Tech leads S&P sector gainers; utilities weakest group

Euro STOXX 600 index up ~1.3%

Dollar off; gold, crude up ~1%; bitcoin rallies ~5%

U.S. 10-Year Treasury yield rises to ~3.72%

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THURSDAY DATA ROUNDUP: FED HANGOVER

A broad array of mixed economic indicators greeted investors on Thursday morning, as they scrambled about trying to parse the implications of Powell & Co's super-pivot.

Last week, 219,000 U.S. workers joined the queue for unemployment benefits USJOB=ECI, marking a 5.2% weekly decline and landing 11,000 shy of analyst estimates.

This marks the lowest level of weekly claims since May, and doesn't appear to bolster the Fed's rate cut rationale, claiming a softening labor market called for a larger reduction in its key interest rate.

"Labor market conditions have cooled but are not cold," writes Jim Baird, chief investment officer at Plante Moran Financial Advisors. "Job creation has slowed but there are no signs of a surge in layoffs that would be cause for alarm."

"For now, the balance between weaker job creation and stable layoffs is consistent with a soft landing," Baird adds.

Ongoing claims USJOBN=ECI, reported on a one-week delay, defied consensus by dropping 0.8% to 1.829 million.

The sales of pre-owned U.S. homes USEHS=ECI dipped by 2.5% last month to 3.86 million units at a seasonally adjusted annualized rate (SAAR), according to the National Association of Realtors (NAR).

The number fell 1% shy of consensus.

Elevated mortgage rates have been a headwind for the sector over recent months, straining affordability and discouraging would-be sellers, who locked in lower rates, from entering the market.

But that was before Powell & Co's 50 basis point interest rate cut, which should help mortgage rates along their slow downward path and coax would-be buyers and sellers from the sidelines.

"Home sales were disappointing again in August," says Lawrence Yun, chief economist at NAR. "But the recent development of lower mortgage rates coupled with increasing inventory is a powerful combination that will provide the environment for sales to move higher in future months."

Factory activity in the mid-Atlantic region covered by the Philadelphia Federal Reserve (portions of Pennsylvania, New Jersey and Delaware) has unexpectedly bounced back to expansion territory this month.

The Philly Fed index jumped 8.7 points, to 1.7 from -7.0, with robust capex and employment providing much of the heat.

Below the headline, however, it was a mixed report.

"The survey’s indicator for current general activity turned positive, while the indexes for new orders and shipments declined and turned negative," says the press release.

Together with the sharp upside surprise from the Empire State index on Monday, these data hint at an east coast manufacturing rebound.

A Philly Fed/Empire State number greater than zero signifies expanded monthly activity.

Finally, The Conference Board's (CB) Leading Economic index (LEI) USLEAD=ECI inched 0.2% lower in August, shallower than the 0.3% decline predicted by economists.

The index aggregates 10 forward-looking economic markers - including ISM new orders, initial jobless claims, building permits, Treasury yield spreads and S&P 500 price performance, among others.

"The erosion continued to be driven by new orders, which recorded its lowest value since May 2023," writes Justyna Zabinska-La Monica, CB's senior manager of Business Cycle Indicators. "A negative interest rate spread, persistently gloomy consumer expectations of future business conditions, and lower stock prices after the early-August financial market tumult also weighed on the Index."

The graphic below pits the LEI against one of its constituents, the S&P 500. While they generally move in tandem, they began to diverge in and around October of 2022, near the end of the S&P's bear market:

(Stephen Culp)

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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:

WALL STREET RALLIES AS FED PIVOT SINKS IN - CLICK HERE

JEFFERIES SAYS BANKING INDUSTRY'S INTEREST INCOME IN JEOPARDY, BUT DEPOSITS COULD BE CHEAPER - CLICK HERE

NASDAQ COMPOSITE: LAND OF CONFUSION - CLICK HERE

CENBANK DIVERGENCES ENDING, APART FROM JAPAN - AMUNDI - CLICK HERE

R&D PICKS IN EUROPE - CLICK HERE

MINERS DO HEAVY LIFTING AS STOXX RISES AHEAD OF BOE - CLICK HERE

STOXX EYES JUBILANT START AFTER FED'S BUMPER CUT - CLICK HERE

UK INFLATION TO KEEP BOE ON CAUTIOUS PATH - CLICK HERE

Jobless claims https://reut.rs/47Flx8M