Both the economic and earnings calendars are very light today, with only a few economic reports of significance released at 8:30 A.M. (EST). The Commerce Department reported that the U.S. trade gap narrowed to a negative $73.8 billion in October, from a deficit of $84.4 billion in the prior month. A declining U.S. trade deficit means that the United States is importing less goods and services relative to what it is exporting, indicating a healthier domestic economy with increased domestic production and less reliance on foreign goods. In general, this can be positive for American businesses and jobs. Meanwhile, we learned from the Labor Department that initial jobless claims for the week ending November 30th totaled 224,000. The figure was up from the prior week’s revised tally of 215,000, but still, along with a decline in continuing claims, indicative of a tight labor market.
The claims data follows the release of the Job Openings and Labor Turnover Survey (JOLTS) data earlier in the week, which showed an uptick in the number of jobs available. These reports would suggest that the labor market is holding up well and come ahead of tomorrow’s much-anticipated November employment and unemployment data. The equity futures are relatively unchanged this morning, which may suggest that trading will remain contained during today’s session, with traders unlikely to make a major move ahead of tomorrow’s jobs report.
Yesterday afternoon brought the release of the latest Beige Book summation of economic conditions from the Federal Reserve. The report showed that economic activity increased slightly in November after little change in preceding months, and that U.S. businesses are more upbeat about demand prospects. In addition, Fed districts reported that inflation was rising only modestly and companies had more trouble passing on higher costs, as consumers grew more judicious about pricing. Hiring was seen as subdued with low worker turnover, while layoffs were also limited. Business contacts said they expected steady to modest growth in employment. The Beige Book findings did not change the narrative that the central bank will probably cut the federal funds rate by a quarter point, to 4.25%-4.50%, at its final Federal Open Market Committee (FOMC) meeting of 2024, which commences on December 17th. It would cap a full percentage point decrease to the benchmark short-term interest rate this fall.
The odds of a Fed interest-rate cut this month also rose yesterday after Fed Chairman Jerome Powell spoke at the New York Times DealBook Summit. Chairman Powell hinted that a rate reduction is likely this month and also said the U.S. economy is in “remarkably good shape”. Given the latter, he also feels that the Fed can "afford to be a little more cautious" while lowering interest rates in 2025. Mr. Powell’s commentary, along with strong quarterly results from semiconductor company Marvell Technology (MRVL) and a more favorable outlook issued by customer relationship management technology provider Salesforce (CRM) in its latest earnings release, gave a boost to the stock market, particularly the higher-growth sectors. The technology-dominated NASDAQ Composite finished 1.3% higher yesterday, while buying in the Dow Jones Industrial Average (+0.7%) and the broader S&P 500 Index (+0.6) increased into the session’s close.
Shocking news was received Wednesday morning that Brian Thompson, leader of insurance giant and Dow-30 component UnitedHealth Group (UNH), was murdered in an apparent targeted attack as he prepared to enter the company’s annual investor conference.
The recent surge in the technology sector has once again been powered by artificial intelligence (AI) news. The market liked hearing that Apple (AAPL) is currently using Amazon.com’s (AMZN) Web Services’ custom artificial intelligence chips for services like search and will evaluate if the company’s latest AI chip can be used to pre-train its models like Apple Intelligence. Apple revealed its usage of Amazon’s proprietary chips at the annual AWS Reinvent conference on Tuesday. Shares of Amazon hit an all-time high during yesterday’s session. Likewise, the stock of semiconductor giant and AI chip leader NVIDIA (NVDA) gained over 3.5%, nearing its own record high. The strength of these mega-cap names lifted the entire technology group. - William G. Ferguson
At the time of this article’s writing, the author did not hold positions in any of the companies mentioned.
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