US jobless claims fell sharply, reversing the recent runup that lifted new filings for unemployment benefits to a four-year high during the previous week. “The decline is more noteworthy since claims in Texas, which drove a spike in the prior week, declined but remained elevated,” said Nancy Vanden Houten, lead US economist at Oxford Economics. “Sorting through the noise, initial claims are still consistent with a relatively low pace of layoffs.”
Thank you, sir, may I have another?
That’s the main takeaway for markets-based rate cut expectations following the Federal Reserve’s widely-expected ¼-point cut for its target rate announced on Wednesday. Although key Treasury yields popped yesterday (suggesting anxiety about rate cuts when inflation is edging higher and is well above the Fed’s 2% target), market signals still point to expectations that the Fed will continue to ease monetary policy. The driving factor for the Fed’s decision: a slowing labor market, which the central bank sees as the bigger risk at the moment vs. inflation.
The US 10-year yield rose on Wednesday, a day when the Federal Reserve cuts its target rate. As expected, the central bank reduced the Fed funds rate by 1/4 point to a 4.0%-to-4.25% range. The 10-year yield briefly ticked below 4.0% during yesterday’s session, but by the close rose 4.09%, the highest since Sep. 9.
The performance of initial public offerings (IPOs) this year had been lackluster before August, trailing US stocks overall, based on an ETF tracking these securities vs. the S&P 500 Index. The relatively weak results for IPO didn’t surprise analysts, who’ve been arguing that private equity has been stealing the thunder of public offerings and keeping the best new companies from going public. But in recent weeks, the performance of IPOs generally has turned up, and is now leading the equities market by a wide margin in 2025, based on a pair of ETFs.
US retail sales beat expectations in August, rising for third straight month. “The American consumer appears to be in good spirits. That’s good news for the economy, but it may heighten debate over how aggressively the Fed needs to cut rates,” said Ellen Zentner, chief economic strategist at Morgan Stanley Wealth Management.
US economic activity is expected to downshift in the third quarter, but not enough to trigger a recession warning, based on the median estimate for a set of nowcasts compiled by CapitalSpectator.com.
NY Fed Manufacturing Index turns negative in September. The unexpected decline reverses gains in the previous two months and marks the biggest monthly setback since June. The pullback partly reflected significant downturns by new orders and shipments.
Investor sentiment has been a paragon of teflon-coated indifference to a run a troubling news headlines over the summer, and there are few signs that potentially bearish developments are starting to resonate. Several risk factors are brewing that will test the optimism anew in the fourth quarter, but the bull trend looks no worse for wear as the trading week begins.
The risk of a US recession ticked up in August, but remains well below a tipping point that signals a high probability of a downturn, according to a business-cycle index published by the Richmond Fed. The SOS Recession Indicator rose to 0.062 last month, which remains substantially under the 0.2 trigger point that equates with elevated recession risk.
● The World’s Worst Bet: How the Globalization Gamble Went Wrong (And What Would Make It Right)
David J. Lynch
Review via Kirkus Reviews
As the last century ended, a popular Washington consensus held that the market had all the answers and that bringing China into the global trading system would cement a peaceful future. That seemed to work out until it didn’t. It’s a discouraging story skillfully told by Lynch, global economics correspondent for the Washington Post. He reminds us that America’s industrial production has been declining since the 1950s and that automation, not foreign competition, remains the biggest factor. Obsessed with cutting costs, American businesses were already moving to Mexico and other nations, but everyone thrilled to China, which had discarded “Maoist idiocy” to open a titanic market to world entrepreneurs. The world was getting richer, and the world’s richest nation could only benefit by trading in this immense, supposedly free market. Giving President Clinton most of the credit, Lynch describes his 1990s crusade for globalization.