Seems Like a Soft Landing
Stay tuned for incoming data.
Welcome to the last day of the week, the month, and the second quarter.And what an occasion it is, with the Federal Reserve’s favorite inflation indicator set for release at 8:30 a.m. ET.
The major equity indexes made it through some chipmaker volatility to stack another set of green numbers on Thursday.
The shock here is that Nvidia $NVDA was only along for what was Micron Technology’s $MU ride – one triggered, perhaps, by a careless “whisper number” that went unmet.
That the S&P 500 and the Dow Jones Industrial Average both posted gains of 0.09 percent suggests some harmonization after the discordant action of the early week as NVDA bounced up and down around the $3 trillion market cap mark.
That the Nasdaq Composite was up 0.30 percent suggests tech is still leading this market, despite the chipmakers’ troubles Thursday.
Breadth is a real factor, but, so far, deterioration hasn’t held back the big indexes from all-time highs so far in 2024, with even the NVDA-less Dow cracking 40,000 for the first time ever a little more than a month ago.
“The stock market is not the economy,” of course, but things are looking good there too.
As Apollo Global Management partner and chief economist Torsten Slok noted on Thursday, it’s hard to be negative on the economy when household net worth relative to income is near record-high levels.
If there is something to keep an eye on – and we’ve been doing that – it’s the employment market.
Even here, though, with continuing claims for unemployment insurance for the week ended June 15 rising to levels not seen since 2021, the broader context is basically positive.
Once they lose a job, it is getting harder to find another, is what that means.
Here’s the thing, though: During the two decades before the COVID-19 pandemic, weekly initial claims averaged approximately 345,000, while continuing claims averaged approximately 2.9 million.
Inflation remains the priority, perhaps at the risk of a policy mistake.
Enter PCE Price Index data for May.
The consensus according to FactSet is that the headline month-over-month print will be flat at 0.26 percent. The year-over-year print is expected to be 2.6 percent, cooling from 2.7 percent in April.
At the core level, the month-over-month forecast is 0.10 percent, cooling from 0.25 percent in April, and the year-over-year forecast is 2.6 percent, cooling from 2.8 percent.
According to the CME FedWatch tool, traders are pricing in a 53 percent chance of a quarter-point rate cut at the September Federal Open Market Committee meeting.
Whatever slowing there is at a macro level seems to be happening at a reasonable pace.
Sounds like a soft landing.
But stay tuned for incoming data.