Jobless claims, flash PMI, home sales: Making the rate cut case
Main U.S. indexes edge red
Cons disc down most among S&P sectors; Financials lead gainers
Euro STOXX 600 index up ~0.4%
Dollar up; crude rallies ~1.5%; gold, bitcoin both off >1
U.S. 10-Year Treasury yield rises to ~3.86%
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JOBLESS CLAIMS, FLASH PMI, HOME SALES: MAKING THE RATE CUT CASE
Data arrived in triplicate on Thursday, just as central bank head honchos descended on Jackson Hole Wyoming for their annual Economic Symposium.
Taken together, they add a few dabs of color to a economic picture that's been emerging for some time; growth is on a gradual cooling trend and the timing seems ripe for the Fed to start cutting rates.
The number of U.S. workers joining the queue at the unemployment office USJOB=ECI crept 1.8% higher last week to 232,000, according to the Labor Department.
The number was essentially inline with expectations, landing 2,000 to the north of consensus.
The overall trend, as expressed by the four-week moving average of initial claims, is sideways. That sideways trend should serve to calm worries that the labor market is rapidly deteriorating.
Instead, it appears to be in a decrescent softening phase, which would seem to support the case for a 25 basis point rate cut at the conclusion of Powell & Co's September conclave.
The data is "consistent with our view that, while the labor market is softening, it isn't weak enough to warrant anything more than a 25bps rate cut at the Fed's September meeting," writes Nancy Vanden Houten, lead U.S. economist at Oxford Economics.
"The minutes from the July FOMC meeting showed that Fed officials are increasingly focused on downside risks to the labor market as they consider when and how much to lower interest rates," Houten adds.
Ongoing claims USJOBN=ECI, reported on a one-week lag, barely budged, inching 0.2% higher to 1.863 million, still well above the 1.7 million pre-pandemic "normal."
Separately, S&P Global released its preliminary "flash" August purchasing managers' index numbers for the manufacturing and services sectors.
The manufacturing sector USMPMP=ECI, facing soft demand amid high interest rates, contracted at steeper rate than July, shedding 1.6 points to 48.
The services side USMPSP=ECI delivered a reading of 55.2, pointing to a nominally accelerating expansion.
A PMI number north of 50 signifies monthly expansion. Below that level indicates contraction of activity from the previous month.
"Growth has become increasingly dependent on the service sector as manufacturing, which often leads the economic cycle, has fallen into decline," says Chris Williamson, S&P Global's chief business economist. "The key takeaways from the survey are that inflation is continuing to slowly return to normal levels and that the economy is at risk of slowing amid imbalances."
Pivoting to the housing market, sales of pre-owned U.S. homes USEHS=ECI rebounded last month, rising by 1.3% to 3.95 million units at a seasonally adjusted annualized rate (SAAR), according to the National Association of Realtors (NAR).
That number is just a hair better than the 3.93 million units SAAR forecast by economists, and marks a partial bounce-back from the 5.1% drop in June.
That's a glimmer of good news for a sector dogged in recent months by a growing lack of affordability and a dearth of homes on the market to choose from, both stemming from elevated mortgage rates.
"Despite the modest gain, home sales are still sluggish," said NAR Chief Economist Lawrence Yun. "But consumers are definitely seeing more choices, and affordability is improving due to lower interest rates."
The average 30-year contract rate is indeed on a meandering decline, while unsold inventory sits at an even four-month supply, up from 3.3 months a year ago.
(Stephen Culp)
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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
U.S. STOCKS CHURN AROUND INTO JACKSON HOLE - CLICK HERE
DOW INDUSTRIALS: AMID RECENT SWINGS, TRADERS TURN TO CHARTS - CLICK HERE
THE CASE FOR MORE BALANCE BETWEEN EXPENSIVE TECH AND DEFENSIVES - CLICK HERE
FROM NATWEST TO BAE: ACTIVE FUNDS ADDING UK EXPOSURE - CLICK HERE
DOLLAR BULLS - CLICK HERE
RETAILERS LIFT STOXX, MINERS DRAG - CLICK HERE
TEPID START IN STORE FOR EUROPE - CLICK HERE
IT'S BEGINNING TO LOOK A LOT LIKE RATE CUTS - CLICK HERE
Initial claims and JOLTS firings https://reut.rs/46VCBXI
Continuing jobless claims and JOLTS hires https://reut.rs/4cAKvXt
Flash PMI https://reut.rs/3XfhUmc
Existing home sales https://reut.rs/3YWoJKS
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