Walking the line to a good start

The stock market had a good start on Wednesday, but that was the high point. It faded as the day progressed, largely because the mega-cap stocks faded as the day progressed, and settled the session with a slight loss. Once again, though, the stock market is on track to have a good start.

Currently, the S&P 500 futures are up 12 points and are trading 0.3% above fair value, the Nasdaq 100 futures are up 30 points and are trading 0.2% above fair value, and the Dow Jones Industrial Average futures are up 211 points and are trading 0.7% above fair value.

That’s a nice opening line, drawn from the strength in Salesforce (CRM), a Dow component, and Snowflake (SNOW) following their better-than-expected earnings results and guidance, some encouraging CPI data out of the eurozone, some M&A buzz with AbbVie (ABBV) acquiring ImmunoGen (IMGN) at a 95% premium, and the lingering fear of missing out on further gains.

Another component in the mix is economic data out of the U.S. this morning that, more or less, went the Fed’s way of aiming for a slowing of the economy and a moderation in inflation pressures.

Personal income increased 0.2% month-over-month in October, as expected, following an upwardly revised 0.4% increase (from 0.3%) in September. Personal spending was also up 0.2% month-over-month, as expected, following an unrevised 0.7% increase in September. The PCE Price Index was unchanged in October (Briefing.com consensus 0.1%) while the core PCE Price Index, which excludes food and energy, was up 0.2%, as expected.

On a year-over-year basis, the PCE Price Index was up 3.0%, versus 3.4% in September, and the core PCE Price Index was up 3.5%, versus 3.7% in September.

The key takeaway from this report is the disinflation seen in the PCE Price Indexes, which is good; however, the 3.5% increase in core PCE, which is what the Fed focuses on, remains well above the 2.0% target. It’s moving in the right direction fortunately, but that isn’t the type of reading that will move the Fed to think about cutting rates soon.

Separately, initial jobless claims for the week ending November 25 increased by 7,000 to 218,000 (Briefing.com consensus 215,000). Continuing jobless claims for the week ending November 18 increased by 86,000 to 1.927 million, hitting their highest level since November 27, 2021.

The key takeaway from the report is that layoff activity remains relatively subdued, which is a good thing. The bad thing, and what fits with a softening labor market, is that it is becoming more difficult to find a job after a layoff.

There was a bit of selling in the Treasury market following the data. The equity futures market, meanwhile, has dipped a bit, but is still walking the line to a good start.

The 2-yr note yield, at 4.61% before the data, is at 4.67% now, up one basis point from yesterday’s settlement. The 10-yr note yield, at 4.27% before the data, is at 4.33% now, up six basis points from yesterday’s settlement.

In other developments, China’s November Manufacturing PMI dipped to 49.4 from 49.5 while its non-Manufacturing PMI fell to 50.2 from 50.6, and OPEC+ is likely to agree to cut oil output by an additional one million barrels per day, according to Reuters. WTI crude futures are up 1.1% to $78.70/bbl and Brent crude futures are up 1.2% to $83.84/bbl.

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Originally Posted November 30, 2023 – Walking the line to a good start