Good Thursday AM,
Yesterday (well, Tuesday as well), was not a good day in markets.
Fear that the Fed may hike rates again and may take longer to cut them prevailed. Yesterday afternoon, the Fed’s Beige Book (it is actually a Beige Book, but is created to describe economic activity across the country’s regions) for August was released and described overall growth as modest with stronger than expected spending on tourism while retail spending slowed. Some consumers have exhausted their savings and began relying more on debt. Supply chain delays improved while housing inventory remained low. Job growth was “subdued across the nation” with “many” businesses reporting ongoing difficulties hiring and retaining skilled workers while price growth slowed from the previous report. Now of that sounds overly optimistic to me. Markets didn’t get the memo but I am sure they will.
Today’s calendar had weekly jobless claims 216k was the number down from 228k.
That is not what markets want to see. Also, final Q2 productivity in at 3.5 and unit labor costs in at 2.2 percent. Both softer as would be expected from the revised Q2 GDP print (2.1 percent versus expectations of 2.4%). Markets seem to be getting some of it right today. Bonds are in the green (in price so yield is lower). We have a ways to go but after we hit the top of the channel yield yesterday, it is likely we will trade back down to 4.10 on the ten year. The question is what we do then.. let’s see what the data says. Next week is CPI and PPI which will be important to the Fed for the upcoming meeting.
Dr. Elliott Eisenberg shared a great tidbit last night…
“Student loans began accruing interest on 9/1/23 and loan payments are due starting 10/1/23, clipping GDP by one-fifth of a point. Additionally, the odds of a 10/1/23 government closure are rising, and that would knock off an astounding one-fifth of point of GDP/week.”
Lastly, it’s increasingly likely that the UAW will simultaneously strike Ford, G.M., and Stellantis on 9/15/23 with an immediate GDP hit of $500 million/day. A collective calamity.
Please remain safe and healthy, make today great!