Market:
- The S&P index rose +1.26%
- The NASDAQ index rose +1.77%
- Crude oil was up $0.86 and $73.98.
- gold down $-19.08 or -0.72% at $2638.45
- Bitcoin is up to $1400 with $98,314
In the US debt market, the yield is higher with the largest short end:
- US 2Y T-NOTE: Yield: 4.2807%, Change: 3.3 bps
- US 3Y T-NOTE: Yield: 4.3222%, Change: 3.8 bps
- US 5Y T-NOTE: Yield: 4.4136%, change: 3.4 bps
- US 10Y T-NOTE: Yield: 4.5995%, change: 2.5 bps
- US 30Y T-BOND: Yield: 4.8141%, Change: 1.6 bps
In the US trading session today, the ISM Manufacturing PMI came in stronger than expected at 49.3 versus 48.4 estimates. That was the highest level since March when the index peaked at 50.3 . Before March, the last time the index was above 50 was October 2022. The low for 2024 was in October at 46.5.
The new orders index reached 52.5 which was equal to the highest level for 2024 (reached in January 2024). Both months were at their highest levels going back to May. The low for 2024 was 44.60.
The index of prices paid was not so good it reached 52.5. Although it is below the high since April of 60.9, it is also above the low for the year of 48.0 reached in September.
The earnings component decreased to 45.3 with a 2024 low of 43.4 reached in July, and a 2024 high of 51.10 reached in May 2024.
Two Fèid members spoke today. Richard Fed Pres. Barkin spoke this morning. While Fed Governor Kugler spoke shortly after US stocks closed with CNBC.
As for Barkin, it is:
We gave a cautiously optimistic outlook for 2025, highlighting a positive bottom line with higher upside risks to growth. He stressed that strong earnings and asset values are key to sustaining consumer spending. While inflation remains above target and needs further work, Barkin noted that core inflation is showing signs of improvement and expects 12-month inflation to ease due to core effects.
He indicated that monetary policy in 2025 will likely take a backseat to economic fundamentals and geopolitics, with the Fed ready to respond as needed. Barkin acknowledged less uncertainty in the financial market and a growing realization that long-term rates may not decline as much as previously expected, in part because of rising US debt pressures. He also mentioned healthy housing demand compared to supply and the likely labor market to favor more hiring over layoffs.
Despite these positives, Barkin highlighted risks, including upside risks to inflation and businesses' concerns about how changes will affect their operations. He confirmed that he would have to remain restrained for longer, given the risks of inflation, and indicated that conditions for rate cuts would require confidence in the return of inflation to 2% or a weakening of demand. In addition, he noted that consumers are becoming more price sensitive and that the transfer of taxes to prices is complex, depending on supply chains and consumer price elasticity. Overall, Barkin emphasized the need to be cautious while managing the economic challenges ahead.
For Fed's Kugler, she:
She shared an optimistic view of the US economy, emphasizing its stability and strong finish until 2024. She noted that the deflation process is ongoing, supported by a labor market that is cooling slowly but steadily, with historically low unemployment and rising real wages. Kugler pointed to productivity as a key factor in maintaining a healthy deflationary economy and expressed optimism about his future career. Although immigration has been helpful in balancing the labor market, he acknowledged uncertainty about future immigration trends and the economic impact of taxes, which may depend to their stability.
Kugler also emphasized the Fed's cautious approach, as it navigates a wide range of economic conditions and monitors inflationary pressures, which could remain sticky. She reiterated that policy decisions will remain based on data and suggested that the Fed has the flexibility to take its time when considering future rate cuts. He declined to comment on the incoming administration's policies, focusing instead on the broader economic picture.
The US dollar was lower against all major currencies except the CAD. It was the largest stock dividend of CAD. A snapshot of the changes in the major US dollar-denominated currencies shows:
- in Euro -0.42%
- JPY -0.16%
- GBP -0.32%
- CHF -0.44%
- CAD +0.33%
- AUD -0.13%
- NZD -0.30%
For the trading week, the USD was mixed vs the major currencies
- EUR +1.08%
- JPY -0.34%
- GBP +1.21%
- CHF +0.71%
- CAD +0.22%
- AUD unchanged
- NZD +0.28%
next week, the US and Canadian jobs report will be released on Friday. US nonfarm payrolls are expected to show a gain of 154K versus 227K last month. The unemployment rate is expected to remain stable at 4.2%. The unemployment rate is also expected to remain unchanged for the month (at 6.8%), with an employment change of +24.5 K compared to 50.5 K last month.
Other data for the week include the
- Services ISM PMI Tuesday. Expectations are 53.2 versus 52.1
- JOLTS job openings are expected to increase slightly to 7.77M from 7.74 million
- ADP Nonfarm payrolls change is expected at 131K versus 146K last month.
- The minutes of the FOMC meeting will be released at 2pm on Wednesday. The Fed at the last meeting reduced rates by 25 basis points but also predicted 2 rate cuts in 2025 compared to 4 rate cuts in the previous estimate from September.
