Vital Statistics:
Stocks are higher this morning in a holiday-shortened session. Bonds and MBS are up.
The bond market closes at 2:00 pm today, while the stock market closes at 1:00 pm. Volume should be light as most people take a 4 day weekend.
Initial Jobless claims fell to 216k last week.
The Chicago PMI fell pretty dramatically to 36.3, driven by declines in Order
Backlogs, New Orders, Production and Employment.
Pretty ugly chart:
Economic activity was mostly unchanged according to the Fed’s Beige Book. Normally the Fed’s Beige Book survey isn’t all that important of an economic indicator, but it is one of the few we have left until the government starts reporting November data.
Consumer spending declined, although the high end remains resilient. This is often referred to as a K-shaped economy, where the high end is doing better and the low end is doing worse. People who hold assets (stocks and real estate) have been benefiting from strong asset prices while people who rent and spend most of their income on necessities are struggling.
The labor market continued to deteriorate, with half the districts reporting weakened labor demand. Although layoff announcements have picked up, most firms are adjusting by implementing hiring freezes. AI is allowing some firms to lower entry-level hiring or improve productivity enough to avoid hiring more people.
Finally prices inflation rose moderately with some tariff-driven inflation, although it remains mild, and way less than feared. Given weaker domestic demand, input price increases are hard to pass on, which means companies are absorbing the higher costs into lower margins.
