Market Wire - Last Data Deluge of 2021 Leaves Markets Underwhelmed

Karl Schamotta - Chief Market Strategist

The Federal Reserve’s preferred inflation measure - the core personal consumption expenditures price index - climbed 4.7 percent in November from the same month last year, hitting a multi-decade high even as the central bank shifted into a more hawkish stance. Data released by Bureau of Economic Analysis this morning showed prices rising slightly more than forecast, up 0.6 percent month-over-month. Headline prices - including highly-volatile food and energy categories - were up 5.7 percent year-over-year.

Spending flatlined: Household outlays were essentially unchanged in November after a 0.7 percent increase in October - suggesting that worries about rising prices and product shortages prompted many families to start holiday spending earlier than normal. Personal income climbed 0.4 percent month-over-month, exactly as markets had predicted.

Separately, durable goods orders jumped by more than expected in November: New orders for goods meant to last three years or more climbed 2.5 percent to a seasonally-adjusted $268.3 billion in November as compared with October, according to Census Bureau data. Economists surveyed by the major economic data providers were expecting a 1.6 percent gain after a -0.5 percent loss in the previous month.

Business equipment purchases accelerated: Orders for non-defence capital goods excluding aircraft - a proxy for business investment - surged 4.0 percent in November after rising 0.7 percent in the previous month.

Supply chain disruptions continued to play havoc: Unfilled orders for manufactured durable goods rose in November for the tenth consecutive month, up 0.7 percent to $1,259.9 billion.

But inventories continued to climb: Stockpiles of manufactured durable goods, also up for ten consecutive months, increased $2.9 billion or 0.6 percent to $469.6 billion.

And jobless claims stabilized: The number of Americans filing new applications for unemployment benefits stayed at 205,000 last week, unchanged from the prior week. Data released by the Department of Labor showed the 4-week moving average – used to smooth out weekly volatility and discern longer-term trends – rising slightly to 206,250 from the previous week's revised 2,750.

The year’s last major set of data releases left the dollar relatively unchanged: The trade-weighted dollar inched slightly higher at 8:30, but remains sharply weaker on the week as Omicron coronavirus variant fears continue to fade. With year-end portfolio rebalancing well underway, a tilt toward risk-sensitive currencies is helping put momentum behind the Australian and Canadian dollars while eroding gains in the Japanese yen and Swiss franc.

Have a happy and healthy holiday season!