Mixed Market Sentiments Ahead of Economic Data Release

Today's pre-market futures have shown little change, signaling a mixed reaction to the latest economic reports released this Thursday. Despite this not being a heavily loaded week in terms of economic data, several key reports are making headlines: the Advance Trade Balance, Retail/Wholesale Inventories, and as typical for Thursdays, Initial and Continuing Jobless Claims figure into today's fiscal narrative. Later in the day, the market will also look towards the Pending Home Sales data from November.

Weekly Jobless Claims Data

Initial Jobless Claims have seen an uptick, with a rise of 12,000 to reach 218,000 last week, marking a three-week peak. The current trajectory harkens back to patterns observed in mid-November. While the numbers are below the 233,000 peak seen six weeks ago, they are up from the 203,000 reported a few weeks earlier. Such fluctuations indicate a departure from the sustainable sub-200,000 levels as we face the reality of a maturing labor market that's bracing for expected softening. Despite these factors, the economy's performance has surpassed expectations through 2023—it remains to be seen how long this resilience will hold.

Continuing Jobless Claims are reported one week behind the initial claims and are hovering around expectations at 1.875 million, showing a minor increase from 1.861 million the previous week. Despite the rise from the 52-week low in early September of around 1.655 million, any number below 2 million in longer-term jobless claims is indicative of a healthy job market.

Trade and Inventory Assessments

The Advance Trade Balance in Goods for November has registered a deficit of $90.3 billion, slightly less favorable than the preceding month's $89.6 billion gap. This figure, though not as distressing as April's $97.5 billion deficit, is still in the median range of the 2020s trade shortfalls, especially compared to early 2022's sub-$12 billion numbers. Reflecting on past decades, the Advance Trade was actually in surplus before the 1980s and had managed to narrow down to better than -$40 billion following the Great Recession.

As for inventory levels, Advance Retail Inventories in November remained at the same rate as the prior month, reporting a -0.1% change instead of the anticipated +0.1%. Advance Wholesale Inventories also saw a smaller decline than forecasted, with -0.2% compared to the -0.4% expectation. Generally, negative monthly shifts in inventory suggest cautious optimism, indicating that inventory overhangs are not too large, which is a positive indicator for the economy.

Market Dynamics and Bond Yields

According to pre-market futures, the much-talked-about Santa Claus Rally appears to be tapering. The Dow has dipped by 40 points post-economic data release, while the S&P 500 is nearly unchanged and the Nasdaq has reduced its gains from 60 points down to 25. Looking at the bond market, yields are down with the 10-year at 3.805%, a figure slightly lower than the previous year's 3.88%. The 2-year yield is at 4.255%, still evidencing an inverted yield curve though it has rallied by 100 basis points since end of October. This late-2023 upswing is largely attributable to these yield movements.

economy, stocks, markets