March 26, 2023
A green market ahead of Fed meeting
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Daily Market Review

A green market ahead of Fed meeting

While we are getting ready to close the week with some gains in the stock markets and a loss in the USD rate, economic data from the US can lower the recession concerns.

The US labor market continues its positive attitude. In the week that ended Friday, January 20, we had only 186K apply for unemployment benefits. With these numbers, initial jobless claims recorded new losses since April 2023 last year, while last week’s 200K was also revised to 190K. Also, the four-week average recorded the lowest level since May 2022, by 197,500, the seventh consecutive week of decline. Continuing jobless claims, published with a one-week delay, recorded 1.675 million, exceeding market expectations of 1.659 million, while the previous week’s number was revised by 8,000 to 1.655 million. In short, these numbers say that the labor market is strong and can support personal income and spending.

An imminent recession is still possible?

Another essential data that was highly regarded yesterday on Thursday was the US Q4 GDP numbers. With a 2.9% raise, the US Q4 GDP behaved better than 2.6% expectations, which is still lower than the 3.2% of earlier estimates.

In addition, actual personal consumption expenditures recorded a preliminary reading of 2.1% in the fourth quarter, below market expectations of 2.9%. However, the task was still higher than in the second quarter (1%) and the third quarter (1.4%). Also, the annualized quarterly rate of the core PCE price index recorded 3.9% in the fourth quarter, a new low since the first quarter of 2021. If inflation continues to fall further, we can expect a rebound in consumer spending in the future.

However, on top of all of that, it was the Durable Goods orders which made many optimistic about delaying the recession. Orders in December rose sharply by 5.6%, exceeding market expectations of 2.5% and a decrease of 1.7% from the previous month. Knowing this is the highest level since July 2020 can make investors more optimistic. The strong performance of the data was mainly due to the increase in durable goods orders excluding defense (at 6.3%, recorded the highest since July 2020). Non-defense capital durable goods orders, excluding transportation and aircraft, recorded -0.1% and -0.2%, respectively.

Even if Thursday ended with a slight weakness in new home sales numbers, overall numbers still dispelled some concerns that a recession was imminent. Stock markets across the globe had positive reactions, and USD is trying to create support around 102. Focus now turns to Chinese markets reopening after a week-long holiday and a Federal Reserve meeting next week.

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