Market Review: December 05, 2024

Economic data from December 5, 2024, shows a U.S. economy displaying resilience in key areas despite mixed signals in the labor market. The trade deficit narrowed significantly, and the Atlanta Fed’s GDPNow estimate for Q4 growth was revised upward to 3.30%, indicating robust economic activity. Labor data reflected improvements in continuing claims but a slight uptick in initial jobless claims. Export and import activity slowed, pointing to softer demand both domestically and internationally. The Federal Reserve’s balance sheet continued to decline, reflecting the Fed’s commitment to quantitative tightening.

Key Highlights:

1. Labor Market Data: Continuing jobless claims fell to 1,871K, signaling improvements in labor market stability, while initial claims rose to 224K, slightly above expectations, suggesting softening momentum in layoffs.
   
   
2. Trade Data (Exports, Imports, and Balance): Exports and imports declined, with the trade deficit narrowing to -$73.80B, better than forecasted, reflecting improved net trade conditions despite slower activity.
   
   
3. GDPNow Estimate (Q4): The Atlanta Fed revised its Q4 GDP growth estimate up to 3.30%, signaling robust economic performance.
   
   
4. Fed’s Balance Sheet: The balance sheet declined to $6,896B, continuing the Fed’s quantitative tightening efforts and reflecting reduced liquidity.

Impact Analysis:

• USD Impact:
  The narrowing trade deficit and improved GDPNow growth estimate provide strong support for the USD, signaling economic resilience. However, mixed labor data and declining exports temper the bullish sentiment slightly. The overall USD impact is bullish.

• Gold Impact:
  Gold faces bearish pressure from improved trade dynamics, a higher GDP estimate, and continued balance sheet tightening, which reduce safe-haven demand. However, rising initial jobless claims provide some support. The overall gold outlook is bearish.

• Equities Futures Impact:
  Equities futures are likely to react positively to the narrowing trade deficit and higher GDP growth estimate, supporting broader market optimism. However, rising jobless claims and slower export-import activity may weigh on specific sectors. The overall equities outlook is bullish, with sector-specific caution.

Today’s data underscores a robust U.S. economic backdrop, supported by improved trade dynamics and strong growth expectations. The mixed labor data highlights the need for close monitoring of layoffs amid broader economic stability. Continued quantitative tightening reflects the Fed’s confidence in managing inflation while maintaining economic resilience.