Halloween candy: PCE, jobless claims, employment costs, etc
Major U.S. indexes red; S&P 500 off >1% Nasdaq down >2%
Tech weakest S&P sector; Utilities lead gainers
Euro STOXX 600 index off ~1.6%
Dollar flat; gold off ~2%; bitcoin off ~3%; crude up ~1%
U.S. 10-Year Treasury yield rises to ~4.32%
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HALLOWEEN CANDY: PCE, JOBLESS CLAIMS, EMPLOYMENT COSTS, ETC
Investors went trick-or-treating for data on Thursday, and filled their plastic pumpkins with mostly upbeat, largely as-expected numbers.
First, the Commerce Department's wide-ranging personal consumption expenditures report (PCE) USPCE=ECI took center stage.
Starting with inflation, PCE prices rose by 0.2% in September, hotter than August's 0.1% reading but inline with expectations.
Core PCE prices increased by 0.3%, warmer than the prior month's upwardly revised 0.2% increase but also hitting the consensus nail on the head.
Year-on-year, headline and core PCE prices rose by 2.1% and 2.7%, respectively, the former inline with and the latter a tad higher than analyst estimates.
"What we what we have here is an economy that's doing quite nicely, but inflation still is a bit of a problem," said Peter Cardillo, chief market economist at Spartan Capital Securities. "And the fact that the core rate continues to stay somewhat elevated is a concern, it means that the Fed could pause," leaving interest rates unchanged at its next policy meeting.
With this, the final piece of the September inflation puzzle slides into place, and it's apparent that closing that last gap to the Fed's 2% target is easier said than done:
Elsewhere in the report, personal income growth accelerated to 0.3% from 0.2% as expected, while personal consumption landed at a robust 0.5%, stronger than the 0.4% predicted by economists and a solid acceleration from the upwardly revised 0.3% growth in August.
Digging deeper, spending on goods enjoyed a solid rebound to 0.7% from -0.1% a month earlier.
Disposable income growth sped up to 0.3% from 0.2%, but due to faster spending growth, the closely watched saving rate - considered a marker of consumer expectations - dropped 20 basis points to 4.6%.
"Growth in real disposable income is a little light, but with inflation expected to decelerate a little, household purchasing power will get a lift," says Ryan Sweet, chief U.S. economist at Oxford Economics.
Turning to the other half of the Fed's dual mandate - the labor market - 216,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI last week, the lowest reading since May.
It marks a 5.3% weekly drop and was 14,000 shy of analyst expectations.
"The big picture remains that initial claims have remained very low given the late stage in the economic cycle," writes Oliver Allen, senior U.S. economist at Pantheon Macroeconomics. "Businesses still seem to be managing labor costs by cutting hiring, rather than with layoffs."
Ongoing claims USJOBN=ECI, which are reported on a one-week delay, fell 1.4% to 1.862 million, suggesting the possibility that pink slip recipients had an easier time finding replacement gigs, or maybe their benefits simply ran out.
Speaking of pink slips, in October, corporate America announced it would lay off 55,597 workers USCHAL=ECI, according to executive outplacement firm Challenger, Gray & Christmas.
That's 23.7% fewer than September's figure, but a 51% jump compared with October 2023. So far in 2024, planned layoffs are up 4% versus the Jan-Oct period a year ago.
Both this year and last, the tech sector has been by far the hardest hit.
Here's how jobless claims stack up against Challenger layoffs:
The Labor Department also released its third-quarter employment cost index (ECI) USEMPC=ECI which unexpectedly slowed to 0.8%, the index's lowest reading since the third quarter of 2021.
The cooldown was largely attributable to slower wage growth, providing assurances that inflation remains on a downward path.
It's also another sign of softening in the jobs market.
"We think these data combined with a welcome deceleration in inflation support a steady easing of monetary conditions," says Carl Weinberg, chief economist at High Frequency Economics.
Slowing employment costs are coinciding with decreasing job openings in JOLTS data, as worker supply and demand approaches a better balance:
Finally, Midwest factory activity unexpectedly tanked in October.
MNI Indicators' Chicago purchasing managers' index (PMI) USCPMI=ECI plunged deeper into contraction territory, shedding five points to land at 41.6. Analysts called for a 0.4 point improvement to 47.
A PMI reading below 50 indicates monthly contraction; a number below 43 is widely associated with recession.
After the frenzy surrounding tomorrow's October payrolls data, the Institute for Supply Management (ISM) is due to release its nationwide PMI report, which is expected to show modest improvement to a still-contractive 47.6.
(Stephen Culp)
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FOR THURSDAY'S EARLIER LIVE MARKETS POSTS:
U.S. STOCKS UNDER PRESSURE IN EARLY TRADE AS YIELDS RISE - CLICK HERE
U.S. STOCK FUTURES REMAIN RED WITH EARNINGS, BIG DATA DUMP - CLICK HERE
HIGHER GROWTH, HIGHER INFLATION: ECONOMIST VERDICT ON UK BUDGET - CLICK HERE
"FRANC-LY, MY DEAR..." TARIFFS WON'T MATTER - CLICK HERE
STOXX AT 7-WEEK LOWS - CLICK HERE
EUROPE BEFORE THE BELL: TECH DRAG AND BANK EARNINGS - CLICK HERE
CLOUDS GATHER OVER 'MAG 7' EARNINGS - CLICK HERE
Inflation gauges https://reut.rs/3AoBR1j
Personal consumption https://reut.rs/3CaFY1K
Challenger layoffs and weekly jobless claims https://reut.rs/40qPzLV
Employment cost index and JOLTS job openings https://reut.rs/4f5Gf4i
Chicago PMI https://reut.rs/4edDKM6
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