Weekly Market Commentary November 11th to November 15th 2024
Data releases this week suggest that inflationary pressures may be stickier than the Fed has been anticipating. Consumer Prices (CPI) in the U.S. rose in October by 0.2% headline and 0.3% for the core reading (excluding food and energy) as expected. The core reading has held stubbornly steady for the last three months, primarily held up by increases in used car and truck prices and airfares along with housing services and owner equivalent rent. The year-on-year readings were also in line with expectations at 2.6% headline and 3.3% core.
Producer Prices (PPI) showed similar stickiness, meeting expectations on the monthly headline number, while modestly exceeding on the core. On a year-on-year basis PPI increased 2.4% and 3.1% core.
Retail Sales in the U.S. grew by 0.4% in October while September sales were revised meaningfully higher from a similar level to 0.8%. Much of the increase came from a rise in motor vehicle sales, in part due to vehicles being replaced in the Southeast following flooding during recent hurricanes. A rise in sales of electronics, appliances and building materials were likely bolstered by natural disaster replacements and rebuilding as well.
The sticky inflation reports along with ongoing consumer spending may keep the Fed on their heels as they debate the next monetary easing rate cut. Fed Chairman Jerome Powell was quoted at a Dallas Regional Chamber meeting on Thursday stating “the economy is not sending any signals that we need to be in a hurry to lower rates. The strength we are currently seeing in the economy gives us the ability to approach our decisions carefully.” The probability of a Fed rate cut in December following the statement and updated inflation reports stood at 62%. If inflation persists and job growth ticks up, it may very well slow the pace of subsequent Fed easing in 2025.
The S&P 500 Index pulled back by 2.1% with some profit taking after particularly strong gains in the prior week. The Nasdaq Composite was lower by 3.1%. The 10-Year U.S. Treasury yield continued its rise, closing the final trading session at 4.44%.
Key economic releases next week include Housing Starts and Building Permits, Existing Home Sales and Consumer Sentiment.
