This Week
This week saw mixed data that mostly supported a rate cut from the Federal Reserve next Wednesday.
- Labor market data were weak for November. ADP showed 32,000 private sector job losses, while the employment subindexes in the Manufacturing and Services PMIs stayed in contraction for 10 and 6 months straight, respectively.
- Core PCE inflation slowed for the first time since April, easing to 2.8% YoY in September from 2.9%, as softer core services inflation more than offset an increase in core goods inflation to a 2¼-year high.
- Activity data were soft, too, with real consumer spending and manufacturing output both flat in September.
So, market odds for a rate cut next week continue to hover above 85%.
With a rate cut looking more likely, the Nasdaq-100® ended the week up +1% (blue line), but 10-year Treasury yields were up over 10 basis points to 4.15% (black line), partly driven by Japan’s potential rate hike.
Next Week
Here are five events I’m watching next week:
- Fed decision, press conference and Summary of Economic Projections on Wednesday
- Q3 Employment Cost Index (Fed’s preferred wage metric) on Wednesday
- October JOLTS Job Openings, Hires, Quits, and Layoffs on Tuesday
- Q3 Productivity Growth on Tuesday
- November NFIB Small Business Optimism on Tuesday