Cooling trend: GDP, jobless claims, pending home sales, et al
Main U.S. indexes red: Dow off ~0.9%
Real Est leads S&P 500 sector gainers; Tech weakest group
Euro STOXX 600 index up ~0.6%
Dollar down; crude off >1%; gold gains; bitcoin up >1%
U.S. 10-Year Treasury yield falls to ~4.55%
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COOLING TREND: GDP, JOBLESS CLAIMS, PENDING HOME SALES, ET AL
A variegated array of indicators were released on Thursday, and the cumulative take-away is that the economy is gradually, steadily slowing down.
That's all going according to the Federal Reserve's plan, the notion that restrictive interest rates will cool demand and take inflation down with it.
The Commerce Department dialed back its first-quarter GDP reading USGDPP=ECI, lowering its quarterly annualized growth rate to 1.3% from 1.6%.
This second stab at the data fell broadly inline with analyst estimates.
Drilling below the headline, net trade and private inventories were the major downside detractors, while an upwardly revised 15.4% jump in housing investment, and a new and improved 7.9% intellectual property/software (likely a reflection of the AI craze) bump, helped mitigate the overall downgrade.
One ray of sunshine was provided by the cooler than expected core PCE price growth reading, which came in at a downwardly revised 3.6%, cooler than the 3.7% expected.
Still, first-quarter reads increasingly look like ancient history, and markets are looking to Friday's monthly PCE report for a clearer, more up-to-date inflation reading.
"The downward revision to economic growth as well as smaller downward revisions to inflation make the Fed a little more likely to start reducing interest rates by September," writes Bill Adams, chief economist at Comerica. "With the economy operating in low gear, a margin of slack capacity is opening up, and consumers are feeling less flush."
Speaking of the consumer - who contributes about 70% of U.S. GDP muscle - their spending growth was reduced to 2.0% from 2.5%, partly attributable to a sharp 4.1% drop in spending on durable goods. Only expenditures on services contributed to the upside, in fact.
"Momentum is slowing as consumers struggle with lingering inflation pressures," writes Jeffrey Roach, chief economist at LPL Financial. "Investors should expect slower momentum in consumer spending to continue throughout the balance of 2024."
Next, the number of U.S. workers to join the unemployment line USJOB=ECI grew by 1.4% last week to 219,000, just a hair north of consensus.
While the overall trend - as expressed by the four-week moving average of initial claims - is slightly upward, the data has essentially been trending sideways near the lower end of the range typically associated with healthy labor market churn.
Ongoing claims USJOBN=ECI, reported on a one-week lag, inched a barely perceptible 0.2% higher to 1.791 million.
"Initial jobless claims remain well below the level at which nonfarm payroll employment would be at risk of backsliding," says Bernard Yaros, lead U.S. economist at Oxford Economics. "Job growth will cool over the remainder of the year, but this will be a function of softer hiring, not an uptick in firings."
Turning to the housing market, signed contracts for the sale of pre-owned homes plunged 7.7% in April, a far steeper decline than the 0.6% dip predicted by economists.
The National Association of Realtors' (NAR) pending home sales index USNAR=ECI dropped to 72.3 its lowest reading since 71.8 in April 2020, the nadir of the COVID panic plunge.
With mortgage rates wafting about the 7% mark, homeowners are loathe to enter the market, leading to an inventory drought, which as put a double-whammy damper on sales (that inventory drought has also, incidentally, supported investment in residences, as seen in the GDP numbers).
"The impact of escalating interest rates throughout April dampened home buying, even with more inventory in the market," says Lawrence Yun, NAR's chief economist. "But the Federal Reserve's anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.
Finally, the Commerce Department also unveiled its advance take on the April goods trade balance and wholesale inventories.
The U.S. goods trade gap USGBAL=ECI, the difference between the value of imported versus exported merchandise, widened by 7.7% last month to $99.41 billion.
"The goods deficit widened sharply in April, with the shortfall between exports and imports the largest since May 2022," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics.
The increasing imbalance bodes ill for second quarter GDP, having been among the biggest topline detractors in the first three months of the year.
And the value of goods stored in the warehouses of U.S. wholesalers USAWIN=ECI, managed to stage a modest 0.2% rebound from March's 0.4% decline.
Again, those two economic metrics - trade and inventories - were among the biggest detractors in the January-March period.
(Stephen Culp)
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FOR THURSDAY'S OTHER LIVE MARKETS POSTS:
S&P 500 HANDILY BEATING SMALL-CAP RUSSELL 2000 THIS YEAR: WHAT GIVES? - CLICK HERE
U.S. STOCKS DECLINE; SALESFORCE DRAGS THE DOW DOWN - CLICK HERE
DOW INDUSTRIALS: THE FORCE IS WEAK WITH THIS ONE - CLICK HERE
PRIORITISE LIQUIDITY NEEDS WHEN RATES COME DOWN - UBS - CLICK HERE
POSTCARD FROM MILAN BANK TOUR: "VERY CONSTRUCTIVE" - CLICK HERE
STOXX STEADIES ON DEFENSIVE SUPPORT - CLICK HERE
EUROPEAN FUTURES POINT TO ANOTHER DOWN DAY - CLICK HERE
BIDING TIME BEFORE THE DATA DUMP - CLICK HERE
GDP contributors https://reut.rs/3KmgiQj
GDP consumer contributions https://reut.rs/3V35nQv
Jobless claims https://reut.rs/4c1TEZx
Pending home sales https://reut.rs/3X0fRTm
Související aktiva
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