Market Reivew December 12, 2024

Economic data from December 12, 2024, presents a mixed picture for markets. Labor market data showed weakness, with both continuing and initial jobless claims rising more than expected, signaling softening conditions. Inflation data revealed easing core producer price pressures but a stronger-than-expected rise in headline PPI, reflecting mixed signals on inflation trends. The 30-Year Bond Auction saw yields decline to 4.54%, reflecting strong demand for long-term debt, while the Fed’s balance sheet ticked up slightly, indicating minor liquidity adjustments.

Key Highlights:

Labor Market Data:

• Continuing jobless claims rose to 1,886K, exceeding forecasts, and initial jobless claims surged to 242K, well above expectations, indicating labor market softening.

Inflation Data (PPI):

• Core PPI increased by 0.20%, aligning with forecasts but below the prior 0.30%, suggesting easing cost pressures.
• Headline PPI rose by 0.40%, surpassing expectations of 0.20%, signaling renewed inflationary concerns at the producer level.

30-Year Bond Auction:

• The yield on the 30-Year Bond fell to 4.54%, reflecting strong demand for long-term U.S. debt and easing expectations for aggressive Fed tightening.

Fed’s Balance Sheet:

• The balance sheet increased slightly to $6,897B, reflecting minor liquidity adjustments and a pause in quantitative tightening.

Impact Analysis:



• USD Impact:
  Rising jobless claims and declining 30-Year yields weigh on USD, offsetting the support from higher headline PPI. The slight balance sheet expansion adds further bearish pressure. The overall USD impact is bearish.

• Gold Impact:
  Gold benefits from weaker labor market data, higher PPI, and declining bond yields, which reduce the opportunity cost of holding non-yielding assets. The slight balance sheet expansion further supports gold as a hedge against inflationary concerns. The overall gold outlook is bullish.

• Equities Futures Impact:
  Equities are likely to respond positively to easing core PPI and lower bond yields, which support growth sectors. However, rising jobless claims may temper optimism, particularly in labor-sensitive industries. The overall equities outlook is slightly bullish.

Today’s data highlights diverging economic trends, with softening labor market conditions contrasting with renewed inflationary pressures. Markets will focus on the Fed’s policy response as inflation signals remain mixed, and labor conditions weaken. The decline in bond yields and the slight balance sheet expansion suggest a cautious approach to tightening, which could support equity markets and gold in the short term.