Markets gain despite a split fed decision

Macro data distorted by post-shutdown backlog

Macroeconomic data were thin and distorted by the post-shutdown backlog. Following the October-November government shutdown, Federal statistical agencies are still reworking their release calendars. The Bureau of Economic Analysis canceled its scheduled Q3 GDP updates and now plans to release the initial estimate on December 23, with several other reports also rescheduled. The Bureau of Labor Statistics similarly revised its calendar, combining or omitting several October indicators. Consequently, investors and policymakers lack their usual late-month economic inputs.

Recent data indicated a mixed economic picture, pointing to softness in confidence but resilience in key sectors. Labor data showed that seasonally adjusted initial jobless claims fell to 216,000 for the week ending on November 22. Continuing claims edged up to approximately 1.96 million, confirming a labor market characterized by low layoffs but slower overall hiring. However, consumer sentiment deteriorated, with the Conference Board’s confidence index plunging to 88.7 in November (down from 95.5)—the weakest since April—as households cited high prices and softening job prospects.

On the positive side, a delayed report showed September durable goods orders rose 0.5% month-over-month. Crucially, core capital goods (ex. air/defense) firmed, providing a mild positive signal for late Q3 business spending. Furthermore, pending home sales rose 1.9% month over month in October as lower mortgage rates helped coax buyers back. Most regions of the country saw increases, except the Western U.S., where activity did not rise and may have softened. Finally, e-commerce strength was evident on Black Friday, with online sales hitting $11.8 billion, up 9% from 2024 per Adobe Analytics. There is evidence that Gen Z shoppers, who only represent 8% of retail spending but have outsized voices on social media, are tightening their spending meaningfully.

Split Fed

The market probability of a 25 bps rate cut at the Fed’s December 10 meeting edged up last week to 87%. But, in an analysis by the WSJ, the Fed appears to be split with Governors Waller, Williams, Miran, and Bowman more likely to favor a cut. Meanwhile, Governors Collins, Schmid, Goolsbee, Musalem, and Barr are less likely to favor a cut. The positions of Chair Powell and Governors Cook and Jefferson remain unclear.

The week ahead

This week, market attention will be split across several key data points. Investors will first watch the sales figures from Cyber Monday. The major focus, however, will be the ISM Manufacturing (Monday) and ISM Services (Wednesday) reports, which will provide the first clean read on post-shutdown demand and supply dynamics. Additionally, the highly anticipated combined October/November Employment Situation update from the BLS is also expected this week.