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Market participants, investors, traders and economists have been warning against reading too much any market moves this week given year-end volatility and illiquidity. Investors kicked off the penultimate trading day of a volatile year on Thursday with a duet of anodyne, slightly better-than-expected indicators.
Economic Data
The number of US workers filing first-time applications for unemployment benefits unexpectedly dipped to 198,000 in the week leading up to Christmas, edging below the 200,000 mark for the third time in two months. read more
The surprise decrease provides further evidence of a worker drought as a fresh wave of COVID infections keeps even more workers home and convinces employers to delay handing out pink slips. The data has now drifted below the level commonly associated with healthy labor market churn.
Job openings touched an all-time high of 11 million in October, prompting businesses to sweeten the pot by hiking wages, which in turn has supported consumer spending.
The Chicago purchasing managers’ index (PMI) (USCPMI=ECI), courtesy of MNI Indicators, delivered a print of 63.1, a monthly increase of 1.3 points and 1.1 points above consensus. A PMI number over 50 signifies expanded activity over the previous month.
The increase was driven by gains in production, new orders and inventories, with employment and deliveries weighing down the headline number.
Other Developments
Wall Street’s tentative rosiness matched the data, with all three major stock indexes modestly green. All three remain on track to post weekly, monthly, quarterly and annual gains, with the benchmark S&P 500 currently boasting a 28% surge in 2021.
The Dow Jones Industrial Average (.DJI) and S&P 500 (.SPX) are both on track for fresh record-high closes early Thursday as a drop in weekly jobless claims showed no impact yet on employment from the surge in US coronavirus infections.
As for gold prices, the prevalent move on Thursday was pressing higher in recent trade and look to be on course to test Tuesday’s $1820 highs.
A strong weekly US jobless claims report, that showed initial claims dropping back under 200000, namely below pre-pandemic levels and continued claims falling to just above 1.7 million, in line with pre-pandemic levels, does not seem to have weighed on the precious metal.
Strong labour market data would weigh on gold as it would be interpreted as having hawkish implications for Fed policy.
But the Fed has gone to great lengths in recent weeks, including at its latest meeting, to acknowledge the tightness of the current US labour market, so Thursday’s data does little to surprise the bank or change this stance.
The 5-year Treasury yields dropped under -1.63% in recent trade, its lowest level since 9 December and is down nearly 10bps on the day. That has not been accompanied by a fall in the nominal 5-year yield of equal magnitude, thus pushing 5-year break-even inflation expectations higher. 5-year moved above 2.90% on Thursday and look on course to test the early December highs at 2.92%.
