Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)Anyone who is borrowing money or has a loan coming due celebrates the Federal Reserve’s rate cut but mitigated by where on the yield curve one is borrowing against as long rates rise again in response. One yr ago when the fed funds rate was at 5.25-5.50%, the 10 yr yield was at 3.90% vs today’s fed funds rate of 4.25-4.50% and a 10 yr yield of 4.50%.

2)The December S&P Global PMI for the US gained 1.7 pts m/o/m to 56.6 with all the strength coming from services. This component rose to 58.5 from 56.1 while manufacturing remains under continued pressure at 48.3 vs 49.7 in November.

3)The final December UoM consumer confidence was 74, up from 71.8 in November. That’s the best since April but with a wide differential in opinion between Republicans and Democrats. One yr inflation expectations rose to 2.8% from 2.6% but the 5-10 yr guess fell to 3% from 3.2%.

4)The PCE November inflation rate rose one tenth for headline and core with both one tenth below expectations. The headline gains were 2.4% and 2.8% for headline and core vs 2.3% and 2.8% in the month before. Energy prices rose .2% m/o/m but fell 4% y/o/y while food was also up .2% m/o/m and 1.4% y/o/y. Goods deflation continued, lower by .4% y/o/y, offset by services inflation of 3.8%.

5)When including the slight October revision, personal income in November was in line with the estimate. Specifically private sector wage/salaries grew by .6% m/o/m and 5.7% y/o/y (the quickest since May).

6)Core retail sales in November rose .4% m/o/m as expected after a one tenth decline in October. Not included in the core print was the 2.6% m/o/m jump in auto sales/parts after a 1.8% rise in October. Building materials, also outside the core read, was up .4% m/o/m and 2.5% y/o/y.

7)Q3 GDP was revised up to 3.1% from 2.8% and vs the estimate of no change. Old news though.

8)After the surprising pop higher last week in initial jobless claims to 242k, they fell back to 220k this week, 10k less than expected. Smoothing this out puts the 4 week average to 226k from 224k. Continuing claims was 1.874mm, little changed with the week before but below the estimate of 1.892mm.