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Listen Live
Saturday’s: 9AM 1590 AM/97.9 FM KVTA
Sunday’s: 7AM K-EARTH 101 FM
Retail Snails: November headline Retail Sales were dismal, down -0.6% vs. est. of -0.1%. Ex-Autos, they were down -0.2% vs. est. of +0.2%.
Jobs, Jobs, Jobs: Initial Weekly Jobless Claims were much lighter (better) than expected, 211K vs. est. of 230K. The more closely watched 4 week moving average dropped to 227K. Continuing Claims matched expectations at 1.671M.
Rosie the Riveter: The December NY Empire Manufacturing Index showed a huge reversal from some small gains in November (+4.5) to a big contraction in Dec of -11.2, the market was expecting -1.0. The Philly Fed Manufacturing Survey also showed a major contraction, down -13.8 vs. est. of -10.0. November Industrial Production also was weaker than expected, -0.2% vs. 0.1% and Capacity Utilization 79.8% vs. 79.8%
Central Bank Palooza: The Swiss National Bank raised their key interest rate by 50BPS to 1.00%. The Bank of England raised their rate by 50BPS to 3.50% (a 14 year high). the vote was 7-2 which breaks down to 6 wanting a 50BPS hike and 1 for 75BPS. 2 voted for no change. BofE officials admit that they are probably already in a recession. The European Central Bank (ECB) raised their rates by 50BPS with their main rate now at 2.50% and gave the guidance that interest rates “will still have to rise significantly at a steady pace”. They also announced that QT will begin in March at a “measured, predictable pace”, with the average monthly decline in bonds will amount to 15 billion euros until the end of the second.
The Fed and Powell tossed cold water on markets yesterday, unwilling to back away from the aggressive attack on inflation. The belief Powell would ease his rhetoric about the Fed’s intent to attack inflation by signaling the end may be in sight was slapped down. The reaction sent equities lower and interest rates slightly lower. This morning in futures trading the DJIA -361 at 8:30 am ET. No dovish tilt from the Fed and today the ECB, BOE and Banxico are all expected to follow with 50-bp hikes today, slowing their previous pace. In Europe, the focus will be on plans to shrink the ECB’s almost €5 trillion stash of bonds. The BOE’s path ahead may be muddied by a split committee. Update: ECB’s rate hike was accompanied by higher inflation projection that signaled monetary tightening could intensify. The pound extended its losses after policymakers in London also increased rates.
Markets were leaning hard on the idea the high for the FF rate would be 4.50% likely by the March FOMC meeting. The economic outlook is slowing, inflation is slowing, Nov CPI core 6.0% (still too high for the Fed), improving supply chain issues, added up to a more dovish outlook from the Fed. Powell yesterday made it clear the Fed will not let up until inflation expectations decline to 2.0% where the Fed wants it to be. Equity markets also now contending with increased recession possibilities.
