November PPI comes in Hotter than Expected; Futures Fall, Gold, Silver Ripped Lower after Big Gains Wednesday

Uh-oh.

At 8:30 am ET, the BLS issued the following:

The Producer Price Index for final demand rose 0.4 percent in November. Prices for final demand goods increased 0.7 percent, and the index for final demand services moved up 0.2 percent. Prices for final demand advanced 3.0 percent for the 12 months ended in November.

This was not expected by most of the brainiacs on Wall Street, but those in goods-producing businesses have been seeing input prices rising throughout the year. The 0.7 percent increase puts yesterday's CPI figure into question. Surely producers are passing along their increased costs to consumers.

That's why CPI and PPI, two measures that are never revised and are merely estimates of a very large population (all of America) should be regarded as highly unreliable.

Nevertheless, Wall Street's response was typical. Stock futures sold off just as rapidly as they rose on Wednesday's benign CPI release. The BLS press release offers more granularity, but, suffice it to be said that Wall Street is set up for a massive waterfall event, largely because it throws shade on the Fed's proposed 0.25% cut in the federal funds rate next week, but also because, in the most basic sense, inflation is bad.

Missing Wall Street's estimates (put another way, the experts on Wall Street were way off) isn't catastrophic, but it will likely leave some deep dents.

Just after 9:00 am ET Dow futures were down 32 points, S&P futures were off 16, and NASDAQ futures slid 116.

In an odd, but somewhat expected twist of logic, gold and silver are both down sharply. However, Wednesday saw some of the best gains in the past month. Gold is currently down more than $30, to $2,725.50. Silver is off 35 cents, at $32.62 after reaching a high overnight of $33.31.

If there's inflation at the producer level, it's a safe bet that consumer prices will soon be rising. In such an environment, precious metals usually do exceedingly well.

With 39 days left until Trump's inauguration, it's a crap-shoot in the near term.

At the Close, Wednesday, December 11, 2024:
Dow: 44,148.56, -99.27 (-0.22%)
NASDAQ: 20,034.89, +347.65 (+1.77%)
S&P 500: 6,084.19, +49.28 (+0.82%)
NYSE Composite: 19,891.03, +9.13 (+0.05%)

CPI In-Line, Who Cares?; Federal Government, Merrick Garland Slapped with Nationwide Injunction on CTA Constitutionality by Texas Judge

Wednesday morning, December 11, 2024: Does anybody actually care what the BLS reports as November CPI?

Other than bone-heads on Wall Street, probably not. People care about the price of ground beef, whether the Lions will beat the Bills this Sunday, how much money it coast to fill up their gas tank (a number that's been going steadily down, thankfully), and maybe what their kids are learning in the state-run indoctrination centers otherwise known as public schools.

In any case, October CPI was relatively tame, and nobody batted an eyelash, buying stocks until their eyes bled.

In October, the Consumer Price Index for All Urban Consumers rose 0.2 percent, seasonally adjusted, and rose 2.6 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in October (SA); up 3.3 percent over the year (NSA).

So, November CPI was expected to fall in line and maybe drop a bit. The reality:

In November, the Consumer Price Index for All Urban Consumers rose 0.3 percent, seasonally adjusted, and rose 2.7 percent over the last 12 months, not seasonally adjusted. The index for all items less food and energy increased 0.3 percent in November (SA); up 3.3 percent over the year (NSA).

The big takeaway from the 8:30 am ET release was that food at home (bought in grocery stores) was up 0.5% and the shelter component (rent, mortgage, etc.) was up 0.3%. Yep, Americans are still getting squeezed. It cost more to maintain a home and to eat. Lovely.

So, the monthly rate and annual rate was up 0.1% and we're supposed to care? Wash, rinse, repeat. Nobody is going to base buying or selling stocks, budgeting for Christmas or turning the thermostat up or down based on this number, but, it gives the simpletons on CNBC, Bloomberg, and FoxBusiness something to talk about and maybe the Fed will notice, but they probably won't change their minds about cutting the federal funds target rate another 0.25% a week from today.

There are more important items that the mainstream media doesn't even mention. One of them is the fate of the Corporate Transparency Act (CTA) and its implementing regulations. In case you haven't heard of this law, passed as part of the NDAA in 2021, it requires small businesses with fewer than 20 employees and a beneficial owner's interest (BOI) of more than 25% of the company to register with FinCEN (the Treasury Department's Financial Crimes Enforcement Network).

It's estimated that 32 million businesses fall into this denial of privacy trap set by congress. Most businesses were supposed to have registered between January 1 and December 31 of this year. Many small businesses don't even know the law exists, though quite a few were convinced by their lawyers and/or accountants that registration was a necessity because not doing so might open them up to fines of $500 a day and possibly up to two years in prison.

Well, not withstanding that the law was unnecessary and a burden on people running small businesses across the great expanse of America - like barber shops, restaurants, retail stores, online merchants, etc. - a lot of people sheepishly caved to yet another over-the-top demand from los federales and fell into compliance, giving up their right of privacy to the overbearing, out-of-control government.

That was all well and good until Judge Amos L. Mazzant III in the Eastern District of Texas U.S. Circuit Court granted a preliminary injunction, halting the process in its tracks, on grounds that the plaintiffs in the case of TEXAS TOP COP SHOP, INC., ET AL., v. MERRICK GARLAND, ATTORNEY GENERAL OF THE UNITED STATES, ET AL., had satisfied the court with their arguments enough to enjoin the Government from enforcing the Corporate Transparency Act and its Implementing Regulations.

Essentially, what the judge granted stops the CTA in its tracks. Businesses are no longer compelled to register with FinCEN. The government even went so far as to issue a statement on its website, to wit:

In light of a recent federal court order, reporting companies are not currently required to file beneficial ownership information with FinCEN and are not subject to liability if they fail to do so while the order remains in force. However, reporting companies may continue to voluntarily submit beneficial ownership information reports.

How nice of them, allowing companies to voluntarily submit to deprivation of privacy. The government is appealing the ruling and there’s other litigation ongoing, but, considering the degree of competence (none) in Merrick Garland's DoJ, the chances that the government will prevail appear slight.

Attorneys Kyle Fonjemie and Anthony J. Zeoli on Hinshaw Law authored a concise summary of the ruling and its implications.

Effectively, should the law be eventually ruled unconstitutional (which it almost surely is), the millions of business owners who submitted their information to the department of government overreach should have those records expunged.

There are even bills pending in both the House and Senate which seek to repeal the CTA. Backed by the NFIB, which was a party to the Texas lawsuit, H.R.8147 - Repealing Big Brother Overreach Act would accomplish that task and send a message to congress that the American public and individual states are not their playthings.

The House bill has 92 co-sponsors. Senate bill S.4297 is identical to the House bill.

There's more to this unfolding saga which will be addressed in this blog in Sunday's WEEKEND WRAP.

Getting back to the CPI and the loonies that slavishly follow this stuff, stock futures went up like 4th of July fireworks on the announcement because they were "in line" with forecasts. Yeah, only Wall Street cares about this stuff. Meanwhile, eggs, steaks, milk, and rent continue to become out of reach for the average household.

Buy more stocks. The Fed's got this.

At the Close, Tuesday, December 10, 2024:
Dow: 44,247.83, -154.10 (-0.35%)
NASDAQ: 19,687.24, -49.45 (-0.25%)
S&P 500: 6,034.91, -17.94 (-0.30%)
NYSE Composite: 19,881.90, -124.36 (-0.62%)

Stocks Sent Sideways; In Laughable Move to Suppress Gold's Price, CME to Begin Offering 1-ounce Gold Futures Contacts In January

There was nothing unusual about Monday's declines on the major indices, except maybe that the Dow lost ground for the fifth time in the last six sessions and that Wednesday of last week - the only day the Dow finished on the upside - produced an all-time high.

That sequence may indicate to some that Wednesday's record was an outlier, to others, signs of a near-term top, and to some, nothing in particular. It's safe to say that with stocks in a supreme bubble, nobody really has a handle on where it's all headed, especially those who think they know, the experts at Goldman Sachs or Merrill Lynch, or even your favorite stock picker.

Expectations for a rosy future in stocks can almost always be found somewhere on Wall Street. The latest prognostications for the year 2025 are hovering around S&P at 7000, implying a gain of around 15% for the coming year, a number that would be a disappointment when compared to this year's gain of 27% on the S&P.

It may be a little too early to say so, but stocks are likely to bounce around quite a bit before heading to the peaks in 2025. There's ample room for a sizable pullback, likely in the first and second quarter, setting up a scenario for a late run to year-end targets. Timing may be everything in the coming six to 18 months of investing.

Longer term, who knows? Stocks can go much higher if bubble economics prevails, but odds are that the Fed will continue to cut interest rates to a point at which inflation just can't be held back any longer. On that point - rate cuts - the Fed's current pathology seems to fly in the face of the market predictors' paradise scenario, the one in which stocks fly to the moon and everybody retires rich.

We'd all love that to be the case, but the realists probably know better.

Gold's move on Monday and again this morning is telling a different tale, approaching $2,700 with gusto and even getting to it just moments ago on the COMEX. Oddly enough, with gold apparently on more people's minds than just central bankers, the CME has announced the launch of a 1-ounce gold futures contract on January 13, 2025, pending regulatory approval, i.e., SEC's valued rubber stamp.

Jesse Columbo of MoneyMetals.com analyzed some of the issues such a contract offering would entail, the most pronounced being that the contract calls for cash settlement. Nobody exercising such a contract would be able to redeem it for physical metal. As such, it's just another diversion away from the ultimate hedge against everything in the Federal Reserve wonderland of fiat currencies, physical possession of gold bullion.

Thus, offering a gold futures contract on 1-ounce of gold that is not redeemable in gold is just more speculative misdirection from the likes of CME, COMEX, LBMA, and their friends at the Federal Reserve, none of whom want to see people buying and - perish forbid - hoarding gold when their chief function in the world of finance is to keep the mighty U.S. dollar as the pre-eminent store of value.

It's actually laughable. Only retards with limited cash on hand, or other retards with lots of money seeking to distort the true value of an ounce of gold (brokers, dealers, other proxies for the Fed) would bother with these contracts for "paper gold."

Anybody who wants to own an ounce of gold can just go to one of the many online dealers, or eBay, or their local coin shop and buy a coin, a round, a bar of gold. It's that simple.

The only conclusion as to why the CME would expand its offerings of gold futures in smaller denominations would be to lure in speculators and riggers who don't actually want to own gold at lower margins. When gold goes to $3,000, or $5,000 or $10,000, will the CME then begin offering 1/4-oz contracts, 1/10th-oz contracts?

Bet on it.

If you're the type of person who doesn't see the value of holding assets with no counter-party risk - gold, silver, other tangible assets - then continue dabbling in stocks, options, derivatives, and other time-and-money wasters.

But, if you don't trust the people on Wall Street, the Fed, the government, and maybe your neighbors who have three cars, a 401k, and dine out three times a week, then maybe physical possession of gold and silver is for you.

Anybody with less than three eyes can see, in a world built on debt, fiat currencies and fractional reserve banking, where gold and silver prices are headed.

Ultimately, it's wealth protection. In other words, "good as gold."

At the Close, Monday, December 9, 2024:
Dow: 44,401.93, -240.59 (-0.54%)
NASDAQ: 19,736.69, -123.08 (-0.62%)
S&P 500: 6,052.85, -37.42 (-0.61%)
NYSE Composite: 20,006.26, -101.53 (-0.50%)

WEEKEND WRAP: Bitcoin Tops $100,000; Dow, S&P, NASDAQ New All-Time Highs; Gold, SIlver Continue Decline; Gas at Multi-Year Low

This story is getting a bit old, but bears repeating: Stocks continue their ascent to who-knows-where, as the Shiller PE settled Friday at the second highest level ever, 38.88, slightly above 38.58, the pandemic level of October, 2021.

Considering that the highest reading ever, 44.19, was at the height of the dotcom boom in November 1999, implies that this bubble has further upside because it almost certainly is the biggest balloon ever.

Stocks do not always go up. It's a known fact, just like real estate in the early 2000s, when the most profitable activity was to own residential real estate and do nothing else. That episode ended in the sub-prime collapse which took real estate values down 40-60% and more in some cases, triggering millions of foreclosures nationwide and widespread financial reordering.

Will this crash play out gradually, then all at once, like in Hemingway's "The Sun Also Rises"? That seems to be the preferred pathway. The months and years ahead are sure to be entertaining and challenging.

Stocks

While the NASDAQ gained 3.34% for the week, the Dow Transportation Average sank 4.20%, just a week after making a new all-time high.

The Dow made an all-time closing high on Wednesday, but traded lower the other four days of the week.

All of the major indices are riding well above their 50-and-200-day moving averages. The NASDAQ is particularly stretched, more than five percent above its 50-day moving average and all of them have remained above their 50-week moving averages since November of 2023.

Currently, there's more than ample bullishness amid uncertainty, though the market appears to believe the incoming Trump administration will usher in an era of greater prosperity, or, at least, accommodating conditions for stocks.

Friday's report of 227,000 jobs gained in the November non-farm payroll data was just about what the market expected and reinforces the contention that the Fed's path of rate cuts will continue without interruption.

S&P 500 sectors for the week were mixed, led to the upside by Telecom (+4.1%), Information Technology (+3.4%), and Consumer Discretionary (+5.9%), while being held back by Healthcare (-2.1%), Utilities (-3.8%), Industrials (-2.3%), Materials (-3%) Energy (-4.6%) and Real Estate (-2.6%).

The week ahead will supply November CPI on Wednesday and PPI, Thursday. Like the latest employment figures, the accounts are expected to be benign, which reinforces a full speed ahead narrative for stocks.

A few notable earning reports in the week ahead include Oracle (ORCL), Toll Brothers (TOL), Yext (YEXT), and Vail Resorts (MTN) on Monday; AutoZone ((AZO), Ollie’s (OLLI), and Academy Sports (ASO) Tuesday morning, Game Stop (GME) and Sportsman’s Warehouse ((SPWH) Tuesday after the bell.

On Wednesday, Macy’s (M), Vera Bradley (VRA), and Adobe (ADBE) report, with Ciena (CIEN), Costco (COST), and Broadcom (AVGO) on Thursday.

Treasury Yield Curve Rates

Date	1 Mo	2 Mo	3 Mo	4 Mo	6 Mo	1 Yr
11/01/2024	4.75	4.74	4.61	4.53	4.42	4.28
11/08/2024	4.70	4.69	4.63	4.53	4.42	4.32
11/15/2024	4.70	4.67	4.60	4.52	4.44	4.34
11/22/2024	4.72	4.67	4.63	4.53	4.46	4.42
11/29/2024	4.76	4.69	4.58	4.52	4.42	4.30
12/06/2024	4.57	4.50	4.42	4.42	4.34	4.19

Date	2 Yr	3 Yr	5 Yr	7 Yr	10 Yr	20 Yr	30 Yr
11/01/2024	4.21	4.18	4.22	4.30	4.37	4.68	4.57
11/08/2024	4.26	4.18	4.20	4.25	4.30	4.58	4.47
11/15/2024	4.31	4.27	4.30	4.36	4.43	4.70	4.60
11/22/2024	4.37	4.32	4.30	4.35	4.41	4.67	4.60
11/29/2024	4.13	4.10	4.05	4.10	4.18	4.45	4.36
12/06/2024	4.10	4.05	4.03	4.09	4.15	4.42	4.34

All yields were lower on the week, but especially short term rates, i,e, bills of 30-day, 60-day, 90-day, 120-day and six-month duration. 30-day and 60-day yields were down 19 basis points. By contrast, the 2-year and 10-year yields only fell by three basis points each.

Nothing shows more conviction that the Federal Reserve will lower the federal funds target rate by 0.25% at the next FOMC meeting (Dec. 17-18) than the enormous drop at the short end of the curve. It's a near-certainty at this point that the Fed is committed to cutting rates on a regular basis. They know the economy is sputtering and are trying to provide relief. The Fed is also quite well aware that the current debt burden and interest payments by Treasury in excess of $1 trillion annually is unsustainable and must be curtailed now that they've nearly bankrupted the federal government (with ample assistance from the free-spending congress, as always).

The big drop on the short end of the curve resulted in further flattening. 2s10s held steady at +5 basis points, but full spectrum fell closer to dis-inversion, at -23.

Timing is ominous. The Fed's plan to flatten the curve completely coincides with Inauguration Day, January 20, and just prior to the January 28-29 FOMC meeting. Two cuts of 0.25% would bring the federal funds target rate down to 4.00-4.25%, implying 30-day bills right around 4.12-4.20%. With the 30-year hovering in the same area, nobody in fixed income, including banks that lend to business, would make any money as there would be no spread upon which to "borrow short, lend long."

Those looking for a liquidity crisis might find one early next year.

Spreads:

2s-10s
9/15/2023: -69
9/22/2023: -66
9/29/2023: -44
10/06/2023: -30
10/13/2023: -41
10/20/2023: -14
10/27/2023: -15
11/03/2023: -26
11/10/2023: -43
11/17/2023: -44
11/24/2023: -45
12/01/2023: -34
12/08/2023: -48
12/15/2023: -53
12/22/2023: -41
12/29/2023: -35
1/5/2024: -35
1/12/2024: -18
1/19/2024: -24
1/26/2024: -19
2/2/2024: -33
2/9: -31
2/16: -34
2/23: -41
3/1: -35
3/8: -39
3/15: -41
3/22: -37
3/28: -39
4/5: -34
4/12: -38
4/19: -35
4/26: -29
5/3: -31
5/10: -37
5/17: -39
5/24: -47
5/31: -38
6/7: -44
6/14: -47
6/21: -45
6/28: -35
7/5: -32
7/12: -27
7/19: -24
7/26: -16
8/2: -08
8/9: -11
8/16: -17
8/23: -09
8/30: 00
9/6: +06
9/13: +09
9/20: +18
9/27: +20
10/4: +5
10/11: +13
10/18: +13
10/25: +14
11/1: +16
11/8: +5
11/15: +12
11/22: +4
11/29: +5
12/6: +5

Full Spectrum (30-days - 30-years)
9/15/2023: -109
9/22/2023: -99
9/29/2023: -82
10/06/2023: -64
10/13/2023: -82
10/20/2023: -47
10/27/2023: -54
11/03/2023: -76
11/10/2023: -80
11/17/2023: -93
11/24/2023: -95
12/01/2023: -105
12/08/2023: -123
12/15/2023: -154
12/22/2023: -149
12/29/2023: -157
1/5/2024: -133
1/12/2024: -135
1/19/2024: -118
1/26/2024: -116
2/2/2024: -127
2/9: -117
2/16: -103
2/23: -112
3/1: -121
3/8: -125
3/15: -109
3/22: -112
3/28: -115
4/5: -93
4/12: -87
4/19: -77
4/26: -70
5/3: -85
5/10: -87
5/17: -94
5/24: -99
5/31: -83
6/7: -92
6/14: -113
6/21: -103
6/28: -96
7/5: -101
7/12: -108
7/19: -103
7/26: -104
8/2: -143
8/9: -131
8/16: -138
8/23: -141
8/30: -121
9/6: -125
9/13: -117
9/20: -80
9/27: -80
10/4: -75
10/11: -58
10/18: -54
10/25: -38
11/1: -18
11/8: -23
11/15: -10
11/22: -12
11/29: -40
12/6: -23

Oil/Gas

WTI crude oil fell near recent lows again this week, closing at $67.17 on Friday, down nearly a buck from $68.15 quoted last Friday. Oil's price continues to reflect the Middle East standoff and the lack of progress in the Ukraine-Russia conflict. Trump soon to enter the picture is also keeping a lid on oil, as is the concern over recession, already a reality in Europe. China's slowdown and a global glut adds to the woes of the producers who apparently cannot cut back enough, lest they destroy their own economies.

Gasbuddy.com reports the national average for a gallon of unleaded regular gas at the pump of $2.99 a gallon, down four cents from the prior week and the first sub-$3.00 reading since May 2021. For reference purposes concerning the direction of gas prices under the incoming Trump administration, the national average never rose above $3.00 from 2016 through 2020. Nothing beats price inflation better than lower prices for oil and gas. Surely, less pain at the pump will translate to happier consumers overall.

California continues to be the price leader, at $4.32 a gallon, down five cents from the prior week and well below prices seen during the summer.

Pennsylvania prices are down, but saw a rise of five cents this week, at $3.27, with the Keystone State holding the high price in the Northeast. New York was static, at $3.12. Connecticut ($3.04) and Massachusetts ($3.01) were slightly lower, while Maryland became the latest state to dip below $3.00, at $2.97 per gallon. Prices in the Midwest continue to wane. Even Illinois was down seven cents ($3.13).

Fuel prices in Oklahoma ($2.44) continue to be by far the lowest in the nation, though five cents higher on the week. Following are Texas ($2.56), Mississippi ($2.57), and Arkansas ($2.59). Louisiana, Kansas, and Tennessee all check in at $2.65. Florida ($3.06) remains the outlier, with all other Southeastern states well below $3.00, including Georgia ($2.89) and North Carolina ($2.84).

Sub-$3.00 gas can now be found in at least 35 U.S. states. The Northeast and West coast are the over-$3.00 holdouts

Arizona ($3.16) was down three cents on the week, with Oregon at $3.48, Nevada at $3.61, and Washington at $3.95, leaving only California above $4.00. Utah ($2.92) and Idaho ($2.99) have both come down steadily over the last eight months.

Bitcoin

This week: $99,645.69
Last week: $97,184.05
2 weeks ago: $97,283.64
6 months ago: $69,277.68
One year ago: $43,790.26
Five years ago: $8,020.98

Bitcoin remains atop the asset leaderboard, up 125% year-to-date and more than 40% since the November 5 U.S. elections, topping out at $103,511.60 this week.

With bitcoin hitting the century mark, pundits and skeptics are split over where its headed, with supporters loudly calling for $200,000 as the next logical stop. Those who consider bitcoin to be the ultimate folly, like Peter Schiff, continue to preach that it is not money, has no store of value nor means of exchange properties, but merely fantastic, fanatical speculation.

Precious Metals

Gold:Silver Ratio: 84.31; last week: 85.97

Per COMEX continuous contracts:

Gold price 11/8: $2,691.70
Gold price 11/15: $2,567.40
Gold price 11/22: $2,743.20
Gold price 11/29: $2,673.90
Gold price 12/6: $2,654.90

Silver price 11/8: $31.42
Silver price 11/15: $30.33
Silver price 11/22: $31.85
Silver price 11/29: $31.10
Silver price 12/6: $31.49

Here are the most recent prices for common one ounce gold and silver items sold on eBay (numismatics excluded, free shipping):

Item/Price	Low	High	Average	Median
1 oz silver coin:	33.01	48.99	39.42	37.27
1 oz silver bar:	34.00	44.68	39.29	38.84
1 oz gold coin:	2,728.74	2,908.78	2,791.17	2,779.44
1 oz gold bar:	2,740.78	2,789.80	2,752.73	2,747.03

The Single Ounce Silver Market Price Benchmark (SOSMPB) trended well lower this week, to $38.71, a decline of $1.73 cents below the November 29 price of $40.44 per troy ounce.

Prices have continued their retreat in both gold and silver. While these lower levels may be temporary, there's reason to believe that Trump policies may keep a lid on prices for a longer period of time. Upcoming Chinese New Year and wedding season in India are likely to boost demand over the near term and silver supply is low. Central banks may have slowed their purchasing of gold slightly, though that also appears to be only a temporary condition.

The longer outlook for the U.S. dollar and fiat currencies in general continues to put a floor under gold prices, with silver lagging, but still tagging along.

WEEKEND WRAP

With the fall of the Syrian government making headlines Sunday morning, there's little doubt that incoming President Trump has already been in contact with world leaders and is influencing decisions on military and economic fronts. Syria's demise may well have been part of a compromise package worked out between Trump and Putin, with Ukraine the ultimate bargaining chip. Russia's willingness to allow Assad's government to collapse and its leader to flee comes at a most opportune time for the United States and its major Middle East ally, Israel.

President Trump promises an end to militarism and conflict and greater competence and cooperation in foreign affairs. If he can also keep inflation down, cut taxes for the middle class, and spur domestic manufacturing, what's not to like?

Food for thought as we proceed through the holidays towards Inauguration Day.

At the Close, Friday, December 6, 2024:
Dow: 44,642.52, -123.19 (-0.28%)
NASDAQ: 19,859.77, +159.05 (+0.81%)
S&P 500: 6,090.27, +15.16 (+0.25%)
NYSE Coposite: 20,107.79, -49.66 (-0.25%)

For the Week:
Dow: -268.13 (-0.60%)
NASDAQ: +641.60 (+3.34%)
S&P 500: +57.89 (+0.96%)
NYSE Composite: -164.25 (-0.81%)
Dow Transports: -739.23 (-4.20%)

Stocks Retreated Prior to November NFP +227,000; Sold the Rumor and Appear to be Buying the News

Futures were initially lower after the BLS announced November Non-Farm Payrolls up 227,000, but changed direction before 9:00 am ET, a half hour after the jobs data became public.

Overall, though the number of jobs created in November was an enormous improvement from the October disaster, which was revised up by 24,000, from +12,000 to +36,000.

From the release:

Total nonfarm payroll employment rose by 227,000 in November, and the unemployment rate changed little at 4.2 percent, the U.S. Bureau of Labor Statistics reported today. Employment trended up in health care, leisure and hospitality, government, and social assistance. Retail trade lost jobs.

Particular notice should be paid to that last, brief, four-word sentence: Retail trade lost jobs.

In a healthy, normal U.S. economy, retail would have been adding jobs in anticipation of increased holiday sales. As a whole, retail trade lost 28,000 jobs over the course of the month. That drop can probably be attributed to a small number of factors, the most prominent being the continuing shift from brick-and-mortar physical stores to online shopping. The internet has completely revolutionized how retail operates. Some companies have adapted, others are still playing catch-up, while some have given up and gone out of business, like Bed, Bath and Beyond, Big Lots, Rue21, Express, 99¢ Only, Joann, The Body Shop, and a host of restaurant chains, led by T.G.I Friday's and Red Lobster.

Accelerating the retail decline is the decimation seen in the number of shopping malls overall. according to Capital One Research, in 1986, there were some 25,000 malls in the United States. On average, from 1986 to 2017, 581 shopping malls closed every year. From 2017 to 2022, the rate of mall closures practically doubled to 1,170 closing every year.

The other factor can be described as an economy teetering on the brink of recession, a condition that's been persisting, or so it seems, for the better part of the last two years. While the Biden administration routinely fudged numbers to their benefit to make the economy appear healthier than it actually was, the coming storm from expected government downsizing at the federal level is about to usher in a recession for real, which is why stock futures headed higher as the cash session approached Friday morning.

As leading indicators go, another one to watch is the price of oil and gas at the pump, both of which are at or approaching multi-month lows. WTI crude oil this morning is trading at $67.58, a sizable decline from the brief high Wednesday morning of $70.34. Gasbuddy.com reports the average price of $3.02 for a gallon of unleaded regular, the lowest price since May, 2021, and also the last time the national average was under $3.00.

If gas isn't moving, cars, trucks, busses and other vehicles aren't either. The lower price of oil and gas is partially the cause of a glut on the global market along with slack demand, especially in developed economies.

With most of Europe already in recession, it won't be long before the U.S. finally admits that things are slowing down. For now, Wall Street is content to believe in anything supporting the narrative that the U.S. is ship-shape and sailing along toward a brighter future, rather than face the reality of a slowing economy, failing infrastructure, and advancing policies that lean heavily towards austerity and deflation.

Believe what you will, but relying on data from the Bureau of Labor Statistics - which just recently had to admit they overstated job creating by 818,000 in 2023 - has been nothing short of a freak show.

Further out along the argument of jobs and the economy is how these figures will affect the Fed's upcoming policy decision, on December 18, and whether the pace of rate cuts will proceed on a regular basis into 2025. That's an easily answered question. The Fed started with a 50 basis point cut in September, cut another 25 basis points in November, and wil likely cut by that same amount again in December and at the next four FOMC meetings in 2025 - January, March, May, and June.

Five cuts of 0.25% will bring the federal funds rate down from its current range of 4.50-4.75% to 3.25-3.50%, a more comfortable level for all involved, at par or slightly above the inflation rate, but stimulative enough to cushion recession losses and keep dis-inflation contained. If the Fed chooses to accelerate the cuts to 0.50% per meeting or continues cuts well into the second half of 2025, that would indicate deeper recession conditions and outright price deflation, which is at the top of the list of greatest Fed fears, alongside threats from crypto-currencies, Trump policies, and the BRICS.

Friday's trading may offer some indication of what's ahead. Should the morning's relaxed attitude devolve into another day of selling, the message might be that the legendary bell at the top of rallies has been rung, though there's always a "Santa Claus" rally to brighten spirits before year's end.

If the market considers a recession, job losses, and government austerity a recipe for higher stock prices - how could they? - then the bubble still isn't ready for popping. The remaining 16 trading days in 2024 ought to be interesting, but even more so, what happens in January is sure to be enthralling.

At the Close, Thursday, December 5, 2024:
Dow: 44,765.71, -248.33 (-0.55%)
NASDAQ: 19,700.72, -34.39 (-0.17%)
S&P 500: 6,075.11, -11.38 (-0.19%)
NYSE Composite: 20,157.44, -31.16 (-0.15%)