Market Review: December 20, 2024

Economic data from December 20, 2024, painted a picture of easing inflationary pressures, steady consumer sentiment, and resilient spending. Core and headline PCE inflation metrics came in below expectations, reflecting slowing price growth. Consumer sentiment and expectations improved, signaling optimism for future economic conditions. However, speculative positioning showed diverging trends, with reduced gold interest and increased activity in crude oil and equities markets, highlighting a shift in market focus.

Key Highlights:

Inflation Data (PCE):

• Core PCE (MoM) rose by 0.10%, below the forecast of 0.20%, while Core PCE (YoY) remained steady at 2.80%.
• Headline PCE inflation (MoM) increased by 0.10%, below the forecast of 0.20%, indicating moderating consumer price pressures.

Consumer Sentiment and Spending:

• Michigan Consumer Expectations improved to 73.3, while Consumer Sentiment remained steady at 74, signaling stable optimism.
• Personal spending rose by 0.40%, slightly below expectations but indicating consistent consumer demand.

Speculative Positioning:

• Speculative positions in crude oil surged to 230.0K, reflecting growing confidence in energy markets.
• Gold speculative positions fell to 262.0K, signaling reduced interest in safe-haven assets.
• Nasdaq 100 and S&P 500 speculative positions rose, reflecting increased confidence in equities.

Market Activity and Growth Outlook:

• The Atlanta Fed GDPNow estimate for Q4 remained steady at 3.10%, reflecting stable growth expectations.
• Baker Hughes rig counts remained stable, with marginal increases in oil production activity.

Impact Analysis:

• USD Impact:
  Easing inflation metrics and steady growth expectations weigh slightly on USD, but improved consumer sentiment and reduced bearish sentiment in equities provide support. The overall USD impact is neutral to slightly bullish.

• Gold Impact:
  Gold faces bearish pressure from slowing inflation metrics, improved consumer sentiment, and reduced speculative demand. The overall gold outlook is bearish.

• Equities Futures Impact:
  Equities futures are likely to react positively to improved consumer sentiment, resilient spending, and increased speculative positioning in major indices. Slowing inflation trends further support growth sectors. The overall equities outlook is bullish.

Friday’s data highlights a balanced economic environment, with moderating inflation supporting consumer spending and market optimism. Reduced interest in gold and rising confidence in crude oil and equities suggest a shift in investor focus toward growth opportunities. Markets will likely monitor upcoming Fed communications for clarity on policy direction amid these evolving dynamics.