Early release of economic data due to the Thanksgiving holiday
Due to holidays on Thursday and Friday, most of the US economic data that was supposed to be released during the week was published on Wednesday. However, the market focus on Wednesday was mostly on minutes of held FOMC monetary policy meeting back in early November. According to the published minutes, most participants believed that a slowdown in the pace of rate hikes would soon be appropriate. While despite the recent reduction, the inflation remains at its high levels, participants understand this risk and emphasized that the risk of overtightening also is mounting and that as policy approaches restrictive levels, the ultimate goal of the federal funds rate hike will be more important than the pace of rate hikes. Analysts read that as a sign of slower but longer hawkish measures.
On the economic data front, the labor market shows some signs of weakness. For the week ended November 18, the number of US citizens who have filled out the form to receive unemployment benefits recorded the most significant increase since August 2022, with 240,000 new applications, slightly exceeding market expectations of 225,000. With these new numbers and revised down in the last week's published numbers, the four-week average also increased slightly to 226,750, up from 221,000. Also, the continuing claims for unemployment benefits usually published with one week delay, increased for the sixth consecutive week and recorded 1.551 million in the week ended November 18,
the highest since March this year, and exceeding market estimates at 1.517 million, and up from 1.507 million of the week before that. As most of the layoffs were from the Technology industry, the majority of applicants for unemployment insurance also were from this group.
In other sectors, the manufacturing PMI hit a new low since May 2020, reporting 47.6, the service PMI recorded a third consecutive month of drop at 46.1, while the composite PMI further fell to 46.3, down from 48.2 of month ago. Also, Michigan's consumer sentiment index for November in the United States fell 5% from the previous month to 56.8, erasing about a third of the gains since June's record low. In the continuation of this weaker than expected numbers, long-term business conditions fell by 6% under the double shock of high inflation and high-interest rates. However, Core Durable Goods Orders and Durable Goods Orders respectively at 0.5% and 1.0% both exceeded the market estimates and were higher than a month ago
With these data, now the CME FedWatch Tool shows an almost 76% probability for a 50-basis point rate hike, which can hold the pressures on the US dollar, and lift the stock markets. However, we should not forget that as the reason for these estimates is economic weakness, we should be more cautious about our stock market investments.
