Nonfarm payrolls soared by 353,000, more than twice the 175,000 expected. Average hourly wages also beat at +0.6% (+4.5% YoY) versus +0.3% expected. Unemployment remained at 3.7%. Forget about a March rate cut. Bulls will be lucky to get one in May.
The overnight ramp job has completely disappeared, with futures struggling to remain positive. AAPL‘s meltdown hasn’t helped.
Factory orders and Michigan consumer sentiment are due out at 10ET.
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Powell said what many of us have been thinking: There’s no reason to rush into a rate cut. The part he didn’t say (but implied) was that there was a clear risk to cutting rates at this time.
The market, which has been fueled for months by rate cut expectations, was quite disappointed. SPX shed 1.5% and closed at the bottom of the acceleration channel it’s been in since October. It was only a little bit scary.
Futures fell to slightly below our initial downside target before rebounding overnight on the usual algo nonsense.
Does yesterday’s action change the overall picture? Maybe.
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It has been a long time coming, with expectations of a rate cut ranging from “certainly” to “not a chance in hell.”
Futures are taking their cues more from GOOGL and MSFT than the FOMC at the moment.
Will we finally get a real backtest? Our potential downside targets are getting very lonely.
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Futures are off moderately as investors place their bets on tomorrow’s FOMC rate decision. 
This follows yesterday’s pop in prices which was reported as motivated by a better than expected treasury report, but was in reality driven by [drumroll please] more algo funny business in VIX.
In any case, SPX was finally pried off its 2.24 Fib extension just in time for tomorrow’s FOMC decision.
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Futures are flat as we enter a data-laden week accented by Wednesday’s FOMC interest rate decision.
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PCE increased 0.2% MoM and 2.6% YoY in December, in line with most estimates. Core PCE increased 2.9% YoY. This is the smallest gain since Mar 2021. Drilling down, goods rose 1.1% (durable goods 1.5%) in December while services rose 0.3%.
Real PCE rose 3.2% YoY, with the goods category growing 5% and durable goods rising 8.5%.
At 0.7% MoM, personal spending rose substantially more than the 0.4% estimates (and prior.) Spending rose 4.2% YoY, a slight decrease from November’s 4.4%.
December pending home sales far outpaced estimates at +8.3% versus 2.0% and -0.3% prior. The annual increase was much less frothy at 1.3%. The monthly beat was paced by 11.9% and 14.0% gains in the South and West respectively. Sales dropped 3.0% in the Northeast.
continued for members…Q4 advanced GDP came in at 3.3% annualized versus 2.0% estimates and full year 2023’s 2.5%. The PCE price index and durable goods orders came in as expected, though durable goods ex-transportation came in sharply higher than estimates. The numbers…
Futures had already bounced at the rising white channel midline, but extended their gains after the data dump. The more important chart to watch, however, remains SPX itself.
New home sales are due out at 10 ET.
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In last month’s update on gold and silver [see: Dec 5 Update] we noted that gold and silver had reached our mid-October targets. We forecast that silver would likely drop to its 200-day moving average and continue dropping to backtest two significant trend lines at 22.
It reached 22.04 on Monday before and has bounced 2.5% this morning.
Likewise, gold reversed sharply off our 2152 target from October and dropped 160, but hasn’t quite reached our next lower target. It is an interesting development, and one which makes a statement about the USD and, possibly, inflation.
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Another day, another meltup drifting lower into the open.
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Futures rose to fresh highs overnight on algo action. Currencies, commodities and VIX all remain in position to aid this rally – as long as the bevy of earnings due out this week complies.
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