Lots to Digest, Data Before Turkey

No one particularly enjoys working ahead of a long holiday weekend, and it appears that those who compile and disseminate government data are among them.  We had a huge load of economic data hit us in two waves this morning.  It had the potential to create consequential market moves, but instead it was mostly as expected.

For those of you outside the US, a brief explainer: Thanksgiving is a uniquely American invention, a non-religious holiday for us to offer appreciation to whomever we’d like for all the benefits that have come our way.  And in a truly American spin, we have turned the final Thursday of November into an opportunity to embrace travel delays, overeat, and watch football with family and/or friends.  Many people have the following day off, aka “Black Friday”.  The name arose because the kickoff to holiday shopping often put retailers into profitability for the year.   It has since morphed into a pseudo-holiday of its own, which now features a race to malls or computers for bargain hunting and/or a chance to recover from a day of gluttony.  (Those of us in the market don’t have that luxury.  US stock markets can’t be closed for more than 72 hours at a time, so we have an abbreviated, typically uneventful session.)

Thus, a day before we feast on turkey, cranberries, and so much more, we got to feast on over 20 pieces of economic data.  The most important ones were generally in line with consensus.  Those included Q3 GDP at an annualized 2.8% and October Core PCE with a month-over-month gain of 0.3%.  On the negative side, we had Continuing Claims at a higher than expected 1.907 million, above the consensus 1.892mm — which led to a decline in bond yields – and a dip in MNI Chicago PMI to 40.2 (45 exp).  On the plus side, we saw Personal Income rise by 0.6% in October, well above the 0.3% consensus, but this 10am release came after the bond market’s mood had been set at 8:30.  A well-received 7-year Treasury auction at an earlier-than-normal 11:30 re-affirmed the demand for bonds. 

Stock traders might be wondering why equities seem somewhat glum if the economy isn’t.  First of all, remember that the S&P 500 (SPX) has been up for each of the prior seven sessions, so a -½% decline should cause too much consternation.  Indeed, the -1.3% dip Nasdaq 100 (NDX) is a bit more concerning, but that actually tells the market story best.  All of the “Magnificent Seven” stocks are lower, along with other key tech stocks like Netflix (NFLX) and Broadcom (BRCM). 

The tech selling does have a rationale.  We received disappointing results from both HP Inc (HPQ) and DELL that not only have pushed each of these stocks about -13% lower today, but called into question the demand for personal computers, even as DELL’s server business met expectations.  With their lofty valuations, any whiff of lower tech spending can weigh on sentiment for that sector.

But as of now, not everything is down.  The Russell 2000 (RTY) is slightly higher, and NYSE advancers lead decliners by about 3:2.  This is the flipside of yesterday’s activity, when Mag 7 stocks were generally higher, even as RTY traded lower and NYSE decliners led by a 3:2 ratio.  There are days when the rotation is obvious.  Yesterday and today have been two of them.

Happy Thanksgiving!