Friday data roundup: 13 is a lucky number
Main U.S. indexes rally; Dow out front, up ~0.7%
All 11 S&P 500 sectors green; Materials up most
Euro STOXX 600 index up ~1%
Dollar dips; bitcoin, gold rise; crude up >1%
U.S. 10-Year Treasury yield edges down to ~3.66%
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FRIDAY DATA ROUNDUP: 13 IS A LUCKY NUMBER
Triskaidekaphobes can breathe a sigh of relief.
Investors are wrapping up a week of solid stock market gains with more data hinting at just enough economic softness to ensure a rate cut from the Fed, but not enough to have dampened the buzz of the U.S. consumer.
Let's start there: the mood of the American consumer has grown sunnier this month.
The University of Michigan's (UMich) preliminary reading of August Consumer Sentiment USUMSP=ECI showed a 1.6% improvement from August to its highest reading since May and its most optimistic advance take since April.
Survey participants' assessment of current conditions and near-term expectations both improved, by 2.6% and 1.2%, respectively.
"The gain was led by an improvement in buying conditions for durables, driven by more favorable prices as perceived by consumers," writes Joanne Hsu, director of UMich's Consumer Surveys. "Year-ahead expectations for personal finances and the economy both improved as well, despite a modest weakening in views of labor markets."
While current conditions and expectations metrics have shown substantial improvement from their June 2022 nadir, they are still hovering around the levels of April 2020, the height of the pandemic-related shutdown shock.
As inflation data confirms a gradual cooling in price growth, so follows near-term inflation expectations. Longer-term, however, it's a different story.
One year from now, respondents expect to see year-over-year inflation at 2.7%, down from 2.8% in August. But five-year expectations added some heat, rising to 3.1% from 3.0%.
Separately, the cost of goods and services imported to the United States USIMP=ECI dropped by 0.3% in August, reversing July's meager 0.1% gain and landing a hair below the 0.2% decline analysts expected.
Year-over-year, the Labor Department's report shows import prices grew by 0.8%, a sharp deceleration from the 1.7% increase in the previous month.
While import and export prices differ from other inflation gauges in that overseas demand, oil prices and currency exchange rates come into play, the August cooldown does support the narrative that major central banks have largely contained price growth.
It's that confidence, along with signs of economic softness, which have prompted the European Central Bank to cut its key overnight interest rate this week, and has made a Federal Reserve rate cut next week all but certain.
In fact, financial markets are increasingly betting that Powell & Co will implement a super-sized, 50 basis point rate cut at the conclusion of its policy meeting on September 18.
CME's FedWatch tool now shows a 43% chance of that very thing occurring, and a 57% likelihood of a bite-sized, 25 bp cut.
"The more influential price data was released earlier this week with the consumer and producer price reports," notes Matthew Martin, U.S. economist at Oxford Economics. "But the broad-based nature of the import price decline is yet another signal of moderating inflation pressures economy wide, and supports a rate cut in September."
The chart below shows the interplay between the dollar index and import/export prices:
(Stephen Culp)
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FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:
WHAT A DIFFERENCE A WEEK CAN MAKE! - CLICK HERE
HAVE GRAINS REACHED FERTILE GROUND ON THE CHARTS? - CLICK HERE
THE MACRO OUTLOOK MARKET DIVIDE - CLICK HERE
IS THE ECB FALLING BEHIND THE CURVE? - CLICK HERE
WHY NOT 50? - CLICK HERE
STOXX 600 HEADS FOR WEEKLY GAIN - CLICK HERE
EUROPEAN FUTURES EDGE UP ON RATE CUT BETS - CLICK HERE
SUPER-SIZED FED CUT CLIMBS BACK ON THE TABLE - CLICK HERE
UMich current conditions and expectations https://reut.rs/3Xo7IGP
UMich inflation expectations https://reut.rs/3XGv6AF
Import export prices and the dollar https://reut.rs/3zkNGFk
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