Market Review March 28, 2024

Today's Economic Event Overview: 

• Continuing Jobless Claims: The number of continuing jobless claims rose slightly to 1,819K, slightly above the forecast of 1,815K and the previous figure of 1,795K. This indicates a minor uptick in the number of individuals remaining on unemployment benefits.

• GDP (QoQ) (Q4): The U.S. economy expanded at a rate of 3.40% in the fourth quarter, surpassing the forecast of 3.20% but down from the previous 4.90%. This growth, though reduced from the prior quarter, still indicates robust economic activity.

• GDP Price Index (QoQ) (Q4): The index, which measures inflation within the context of GDP, rose by 1.70%, slightly above the forecast of 1.60% and significantly lower than the previous rate of 3.30%. This suggests a moderation in inflationary pressures associated with economic growth.



• Initial Jobless Claims: Initial claims for unemployment benefits held steady at 210K, slightly below the forecast of 212K, indicating stable labor market conditions.

• Chicago PMI (Mar): The Chicago Purchasing Managers' Index fell to 41.4, well below the forecast of 45.9 and the previous month's 44.0. A reading below 50 indicates a contraction in manufacturing activity in the region.

• Michigan Inflation Expectations and Consumer Sentiment:
• 1-Year Inflation Expectations: Dropped slightly to 2.90% from an expected and previous 3.00%, suggesting a mild easing in short-term inflation expectations.
• 5-Year Inflation Expectations: Also saw a decrease to 2.80% from the forecast and previous 2.90%, indicating longer-term confidence in stable inflation.
• Consumer Expectations and Sentiment: Both indices improved, with Consumer Sentiment rising to 79.4 from an expected 76.5, and Consumer Expectations up to 77.4 from 74.6, reflecting improved consumer outlook.

• Pending Home Sales (MoM) (Feb): Sales rose by 1.60%, exceeding expectations of 1.40% and recovering from a previous drop of -4.70%, indicating resilience in the housing market.

• U.S. Baker Hughes Oil Rig Count: There was a slight decrease in active oil rigs to 506 from 509, suggesting a minor pullback in oil extraction activities.

• U.S. Baker Hughes Total Rig Count: Similarly, the total rig count decreased to 621 from 624, reflecting a slight decline in overall drilling activity.

• Fed's Balance Sheet: The size of the Federal Reserve's balance sheet decreased to $7,485B from $7,514B, indicating some reduction in asset holdings, which might be part of the Fed's monetary policy adjustments.

Impact Analysis

• Impact on USD:
• Robust GDP growth and a stable job market should support the USD.
• The contraction in manufacturing PMI and slight increases in unemployment claims might create some downward pressure, but these are somewhat offset by positive economic indicators elsewhere.

• Impact on Gold:
• Lower inflation expectations and improved consumer sentiment may reduce the immediate need for gold as a safe haven, potentially lowering its price.
• The reduction in the Fed's balance sheet could lead to tighter monetary conditions, which might also impact gold demand.

• Impact on Equity Futures:
• Improved consumer sentiment and GDP growth are positive for equity markets.
• However, the contraction in the Chicago PMI might signal troubles in the manufacturing sector, which could negatively impact related equity sectors.

The economic landscape shows mixed signals, with strong growth and consumer sentiment but some areas of concern in manufacturing and slight upticks in unemployment claims. The overall robustness in GDP and consumer metrics suggests that the economy remains on solid footing despite some sector-specific challenges.