Data feast: GDP, durable goods, jobless claims, etc

<html xmlns=""><head><title>LIVE MARKETS-Data feast: GDP, durable goods, jobless claims, etc</title></head><body>

Nasdaq, S&P positive, Dow down slightly

Energy leads S&P 500 sector gainers; materials weakest group

STOXX 600 index up ~0.4%

Dollar, crude rise; gold off 1%, bitcoin down ~0.5%

U.S. 10-Year Treasury yield edges up to ~3.51%

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A data buffet on Tuesday invited market participants to gorge on evidence of U.S. economic resilience and ongoing tightness in the labor market, which is all very hunky-dory until one considers the terminal level of the Fed's restrictive policy rate.

The U.S. economy grew at 2.9% on a quarterly annualized basis in the closing months of 2022, more robust than the 2.6% consensus and a bit cooler than the 3.2% third-quarter print.

The Commerce Department's first "advance" take on fourth quarter GDP USGDPA=ECI also showed price growth cooling along with consumer spending.

"It's a good number but it doesn’t negate the possibility of a mild recession," says Peter Cardillo, chief market economist at Spartan Capital. "(The Fed tightening) hasn't worked its way through the system, but you’re beginning to see cracks in consumption and inflation."

"I’m sure the Fed is going to take note of that."

Core quarterly PCE prices fell 0.8 percentage points to 3.9%, and personal consumption - which accounts for about 70% of the U.S. economy - eased to 2.1% from 2.3% in Q3.

Another report from the Commerce Department showed new orders for long-lasting, U.S.-made goods USDGN=ECI - which includes everything from waffle irons to fighter jets - blasted past analyst estimates by jumping 5.6% in December, reversing November's 1.7% dip.

Economist forecasts called for a milder 2.5% increase in durable goods orders.

Line-by-line, a 115.5% surge in commercial aircraft/parts led the charge. Excluding transportation goods, however, new orders edged 0.1% lower.

"Orders ex-transportation ... continue to suffer under the weight of aggressive policy tightening by the Fed," says Ian Shepherdson, chief economist at Pantheon Macroeconomics.

"Outright declines in core goods orders signal a deeper downturn in manufacturing output, which now looks set to last through the first quarter, at least."

Indeed, core capital goods - which strip away defense and aircraft items, are considered a barometer for U.S. spending intentions - decreased by 0.2%, in line with estimates.

The number of U.S. workers filing first-time applications for unemployment benefits USJOB=ECI unexpectedly dipped by 3.1% last week to 186,000, falling short of the 205,000 analysts expected.

It marks the series' lowest reading since April and its second week below 200,000, a level typically associated with healthy labor market churn.

The Labor Department's print provides the latest bit of data to tell us what we already know, that the jobs market remains tight despite a string of high profile tech layoffs of late.

This means that employers are loathe to hand out pink slips and implies ongoing upward pressure on wage growth, a worrisome phenomenon to the Fed.

"Given the recent uptick in layoff announcements coming from large businesses, it would be reasonable to expect claims to climb higher, but they are not," writes Thomas Simons, economist at Jefferies. "The labor market data supports continued upward wage pressure even as other economic data releases are slowing and inflation is coming off the highs."

Ongoing claims USJOBN=ECI, reported on a one-week lag, actually edged higher to 1.675 million, hinting at the possibility that it's taking longer for jobless workers to land a new gig.

A third data set from the Commerce Department showed sales of freshly constructed U.S. homes USHNS=ECI increased by 2.3% last month to 616,000 units at a seasonally adjusted annualized rate (SAAR).

The number was just a hair below consensus, which called for 617,000 units SAAR.

Recent easing in mortgage rates, commodity prices and home price growth have sparked a glimmer of hope in a beleaguered sector which has groaned under the weight of inventory scarcity and evaporating affordability.

Most recently, applications for home loans jumped 7% last week as the average 30-year fixed contract rate cooled, as per the Mortgage Bankers Association.

"The labor market is still strong and there are many households who are looking to upgrade their space as remote and hybrid work appear to be sustainable long-term options for many," writes Kelly Mangold, principal at RCLCO Real Estate Consulting.

Below we see how inventories of unsold new homes hovers well above the pre-COVID level, and despite a slight uptick this month, homebuilder sentiment sits at historically pessimistic levels:

Finally, the indefatigable Commerce Department released its advance take on the goods trade gap USGBAL=ECI and wholesale inventories USAWIN=ECI for December.

The difference between the cost of U.S.-made merchandise exported abroad and foreign-made goods imported to the U.S. widened by 8.9% to $90.27 billion.

Scrolling back up to the GDP graphic, net trade contributed 0.5 percentage points to the topline in that last three months of the year.

"Looking ahead, trade flows are at risk of slowing from current levels, as the effects of higher rates globally impact demand for goods and services," says Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

Meanwhile, the goods stacked in the warehouses of U.S. wholesalers grew by a meager 0.1%, marking a sharp deceleration from the previous month's 0.9% gain.

Astute observers will note that in the fourth quarter, private inventories contributed a robust 1.5 percentage points to the headline GDP number, snapping a two-quarter stint in the detractor column.

The S&P and Nasdaq - having digested this data feast, along with a slew of mixed earnings - have decided to take the green pill.

Tech and tech-adjacent momentum stocks put the Nasdaq on top, with the NYSE FANG+ index a clear outperformer.

(Stephen Culp)



U.S. Treasury yields look set to fall this year as inflation moderates and the Federal Reserve reaches the end of its tightening cycle, but reduced demand for U.S. government debt could also limit further yield declines, according to Capital Economics.

“We forecast the 10-year Treasury yield to decline between now and the end of the year, as inflation eases further and the Fed transitions to monetary loosening,” Thomas Matthews, senior markets economist said in a report. However, “a key risk to this projection, in our view, is the weak outlook for demand for Treasuries.”

Yield differentials between U.S. and foreign debt have shrunk and the costs of currency hedging is high, which may make U.S. debt less attractive to investors in other major developed markets such as the euro-zone and Japan. Current account surpluses in Europe and Japan have also shrunk, which means they have fewer excess savings to invest in Treasuries.

Energy exporters who have been running large current account surpluses are likely to be a less significant source of demand for U.S. debt as they diversify their portfolios. Meanwhile, stronger Asian currencies as China reopens means that central banks in the region are likely to stop selling Treasuries, but are not expected to return to large-scale purchases any time soon.

“That leaves domestic investors to pick up the slack,” Matthews said. “This year and next will, in our view, see increasing pressure on domestic banks, insurers, pension and investment funds as the primary source of Treasury demand, at a time when the central bank is set to continue to run down its holdings.”

The benchmark 10-year yield US10YT=RR has declined to 3.487% from a 15-year peak of 4.338% on Oct. 21, on expectations that the U.S. central bank will pivot to a looser monetary policy, and on concerns that the U.S. economy is facing a slowdown.

Matthews expects that the 10-year Treasury yield has only limited declines left, and is likely to reach 3.25% by year-end and 3.00% by the end of 2024.

(Karen Brettell)



Wall Street's main indexes are mixed early on Thursday after data released at 0830 EST showed a resilient labor market and better-than-expected economic growth last quarter that helped ease worries of a deep recession, while Tesla's bullish outlook added to the cheer.

December new home sales released at 1000 EST came in roughly in-line with the Reuters poll.

With this, the tech-heavy Nasdaq .IXIC is posting the biggest rise. It is up nearly 1%. The S&P 500 .SPX is up slightly, while the DJI .DJI is edging lower.

Meanwhile, the Nasdaq, which is on track for a fourth-straight weekly rise, nearly touched its descending 200-day moving average, which now resides around 11,516. The index hit a high of 11,494.636 before quickly backing off to the 11,400 area.

Here is a snapshot of where market stood shortly after 1000 EST:

(Terence Gabriel)



The primary way to move low-carbon hydrogen from production sources to market is going to be ammonia, as hydrogen is expensive to transport, given its low energy density and difficulty in liquefaction, says HSBC.

One way to make low-carbon hydrogen is to build green hydrogen projects, powered by renewable energy, while another way to achieve it would be - to make ammonia from natural gas and then capture the carbon emissions, which is ‘blue’ ammonia.

While conventional ammonia production emits carbon dioxide(CO2) if it is made with fossil fuel, during the production of blue ammonia any CO2 generated is captured and stored.

The high-return, capital-light route to monetizing gas via the hydrogen market is the reason behind the strong interest that Middle Eastern oil companies Saudi Aramco 2222.SE and QatarEnergy have in blue ammonia projects.

Last year, QatarEnergy said it will build the world's largest "blue" ammonia plant, which is expected to come online in the first quarter of 2026 and to produce 1.2 million tons per year. Aramco has plans to produce 11 million tons of blue ammonia by 2030, says the brokerage.

With integration into natural gas, QatarEnergy and Aramco do not take the risk of gas price volatility and thus have broad control over their production costs.

Also, the Inflation Reduction Act (IRA) in the U.S. improves the country's project economics, with companies receiving increased credits compared to earlier for CO2 capture.

"If blue ammonia were priced off the potential ‘pricing umbrella’ offered by green hydrogen (zero carbon emissions), then the returns on blue ammonia projects could potentially be exceptional, given capital costs that are a fraction of those for green hydrogen," says HSBC.

(Siddarth S)



In the wake of Thursday's 0830 EST U.S. data deluge, e-mini S&P 500 futures EScv1 are gaining about 0.6%. This compares to a rise of about 0.5% just prior to the economic numbers coming out.

Action is choppy, but if this holds, the S&P 500 index .SPX, which ended Wednesday around 4,016, appears poised to open around 20 points higher. If so, it can once again attempt to overwhelm an important chart hurdle:

With such an opening pop, the SPX can battle above the 233-day moving average, which ended Wednesday at about 4,024. This Fibonacci-based moving average has capped strength on a closing basis since April 20.

Monday's high was at 4,039.31. The early-to-mid-December highs were at 4,100.51-4,100.96, and the mid-September high was at 4,119.28.

Meanwhile, continued gains can see the spread between the 50- and 200-DMAs narrow further. The spread ended Wednesday at just -22.23 points, or its tightest reading since March 15. If the 50-DMA can cross above the 200-DMA, it can signal a "golden cross," suggesting the potential for a major advance.

The 50- and 200-DMAs should come in around 3,939 and 3,959 on Thursday.

(Terence Gabriel)



(Terence Gabriel is a Reuters market analyst. The views expressed are his own)


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