ACTV - The Fed Skip May Actually Be A Stop
2023-06-27 09:05:00 ET
Summary
- The latest jobless claims came in at 264,000, the exact same number they were at the week before. One week further back, they were at 262,000.
- On their own, those numbers are not so high, but they are the highest since October 2021.
- Powell has sufficient cover to deliver another skip in July, and if the job market keeps doing what it is doing right now, the Fed will ultimately deliver a full stop.
Last week, jobless claims came in at 264,000, the exact same number they were at the week before. One week further back, they were at 262,000. On their own, those numbers are not so high, but they are the highest since October 2021, and in the preceding 18 months, all such weekly reports have been lower.
Recession territory is when jobless claims accelerate past 300,000 and start to regularly reach the 350-400K range, which is a ways off, but suffice it to say that the job market has weakened somewhat.
All that mumbo jumbo about two more rate hikes is just tough talk. I think Powell has sufficient cover to deliver another skip in July, and if the job market keeps doing what it is doing right now, the Fed will ultimately deliver a full stop. The cover for Powell’s continued pause is likely to be the July CPI report, where the horrific June 2022 1.2% month-on-month rise will roll off the chart (red arrow below). and July 2022 will be the base of comparison for the year-over year numbers, when the month-on-month rise came in at zero . If the month-on-month reading for July 2023 is low, we are likely to have good year-over-year and month-on-month readings next month. I don’t want to jinx the data, but July’s year-over-year CPI could be near 3%. All this does not mean the stock market will rally if we keep getting deteriorating PMI indexes and overall negative economic surprises, but it strongly suggests that Powell is done hiking rates.
As for the stock market, this is the last week of the second quarter, and I remember very well that in the last week of the first quarter we had a very sharp rebound. Last week, we chopped around for a week after fresh 52-week highs in the S&P 500 and the Nasdaq 100, and I would not put it past the institutional investor community to run prices up again this week, at a minimum finishing the week on a high note.
All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.
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Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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The Fed Skip May Actually Be A Stop