Breakfast Bites: Some hesitation in Markets?
US underlying data still concerning; US Retail Sales in focus today; In principle deal reached on TikTok
Rise and shine everyone
US Equity Markets continue to move higher, albeit with some hesitation. There still seems to be some holding out ahead of the Fed, but then again we’ve rallied over 35% on the SPX since the April lows. That’s a massive move!
Today’s focus before the Fed tomorrow will be the US Retail Sales at 8:30 am ET.
Speaking of the Fed, Stephen Miran, President Trump’s nominee, won Senate confirmation and will be able to vote on rates tomorrow. At the same time, a US Appeals Court rejected the Trump administration’s bid to remove Fed Governor Lisa Cook, clearing her to vote at Wednesday’s FOMC meeting as well.
Nevertheless, the data coming out of the US economy is probably what’s giving the markets some pause. Yesterday we got the NY Empire State Manufacturing Index, and that significantly missed expectations. I don’t particularly like this data point too much because it tends to be quite noisy, but an alarming drop is something to at least consider.
The Index dropped to -8.7 in September, reversing sharply from 11.9 in August and well below expectations of 5. The decline reflected steep falls in new orders and shipments, while delivery times steadied and unfilled orders slipped further. Inventories contracted again and the average workweek shortened, while employment was little changed. Input costs stayed high and selling price pressures were moderate. Optimism about the business outlook remains muted, with firms expecting flat employment over the next six months.
When we look at the situation, there are varying impacts of tariffs across businesses. For example, Brazil's instant coffee exports to the US fell by about -60% YoY after the 50% tariffs. And the US Commerce Department opened a 232 steel and aluminum “inclusion window”, which means applying more tariffs on derivatives of these products.
Whether it’s scarcity of products or a direct cost increase, prices across the US economy will increase. They may be a one-time increase, but that doesn’t really help the US consumer since things are going to be more expensive than they used to be.
So there is some contraction in various parts of the US economy, with potential increases in prices and many companies are not exactly euphoric about the next several months.