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Thursday, December 19, 2024
Yesterday’s adjustment in the “hawkish cut” on interest rate policy from the Fed seems to have caught market participants off guard. The Dow was gouged to the tune of -1123 points (-2.6%) while the S&P 500 lost nearly -3% and the Nasdaq -716 points, or -3.56%. Yet it was widely expected in the narrative leading up to the final Fed meeting of 2024.
The Fed putting through its 25 basis-points (bps) rate cut was followed by a general re-think in terms of bringing inflation down to its optimum 2% level, just as analysts had guided. But the reality was too much to bear, at least at market valuations prior to 1pm ET Wednesday.
Yesterday’s decision to cut did have one dissenter: Cleveland Fed President Beth Hammack, who voted to keep rates where they were. We expect closer votes on interest rate levels going forward, which was pretty much Fed Chair Jerome Powell’s understanding in his press conference Wednesday afternoon. He was very positive on the state of the economy; he didn’t declare victory in achieving a “soft landing,” but look around the world right now: by comparison, the U.S. is smelling like a rose.
Weekly Jobless Claims Come In Lower: 220K, 1.87M
This morning’s Initial Jobless Claims reached 220K last week, the lowest in four weeks and a welcome respite from the jump to 242K, which was unchanged from the previous week. Back in early October, a big temporary surge to 260K put a level of uncertainty on the near-term jobs market. At 220K, we’re now back down to our norms going back to this past spring.
Continuing Claims, also appearing to notch a new level higher, itself reverted to a steadier 1.87 million this morning, lower than the downwardly revised 1.88 million from the prior week. This 1.87 million level was first established back in July of this year (since the foothills of the Covid pandemic three years ago), and, while we do look to be headed toward 1.9M reads in the coming year, they don’t look to be in any hurry to get there.
Q3 GDP Revised Higher: +3.1%
The second revision of Q3 U.S. Gross Domestic Product (GDP) was revised up 30 bps from its previous read, to +3.1%. This marks the strongest quarter since Q4 of last year, which reached +3.2%. Considering challenges in manufacturing, housing, labor strikes and hurricanes in Q3 of this year, this is a stronger-than-anticipated figure.
The Consumption number advanced +20 bps to +3.7% for the quarter, while the Pricing Index (the full PCE report comes out Friday morning) was in-line at +1.9%. Quarter over quarter PCE came in at +2.2%, up 10 bps and the strongest print since +2.8% in Q2 of this year. A healthy economy forges through difficulties, seasonal and otherwise.