Market Review: October 24, 2024

Today's data reveals a mixed picture, with positive trends in the housing market and improvement in initial jobless claims, alongside persistent weakness in manufacturing. The decline in 5-Year TIPS yields and a slightly shrinking Fed balance sheet suggest stability in inflation expectations and monetary policy.



Today's Event Overview

• Building Permits (Sep) came in slightly below forecast, reflecting a continued slowdown in future construction activity. This trend signals weakness in the housing sector, potentially weighing on economic momentum.

• Jobless Claims: Continuing Jobless Claims rose to 1,897K, indicating rising unemployment, while Initial Jobless Claims fell to 227K, pointing to improved labor market conditions for new job seekers.

• S&P Global PMI data: The Manufacturing PMI remained in contraction territory at 47.8, signaling ongoing struggles for U.S. manufacturers. In contrast, the Services PMI and Composite PMI reflect continued strength in the services sector, with the Composite PMI at 54.3 indicating overall expansion.

• New Home Sales (Sep) surged to 738K, a strong increase that signals resilience in housing demand, likely driven by buyers seeking to lock in rates before further increases.

• 5-Year TIPS Auction saw yields fall to 1.67%, down from the previous 2.05%, indicating increased demand for inflation-protected assets.

Impact Analysis

• Impact on USD:
  The strong performance in New Home Sales and the improvement in Initial Jobless Claims provide support for the USD, but rising Continuing Jobless Claims and lower TIPS yields could offset some of the bullish sentiment. The mixed labor data suggests some labor market weakness but also points to strength in housing and services sectors.

• Impact on Gold:
  Gold may experience some pressure from the improving economic indicators, particularly in the services sector and housing market. However, the fall in TIPS yields could support gold as an inflation hedge, particularly if inflation expectations remain uncertain.

• Impact on Equities Futures:
  The strong New Home Sales and Services PMI should provide support for equities, particularly in the housing and services sectors. However, weakness in the manufacturing sector and rising Continuing Jobless Claims may temper some of the optimism, especially for industrial stocks.

The data today paints a picture of resilience in the U.S. housing market and steady services sector growth, even as the manufacturing sector struggles. The improvement in initial jobless claims suggests strength in new hiring, but the rise in continuing claims highlights potential ongoing labor market challenges. The drop in TIPS yields reflects stable inflation expectations, which could ease pressure on the Fed to tighten monetary policy aggressively.