Happy New Year! The year started off pretty quietly, but then the Fed, Shopping and Jobs—yes, all in 1 week.
The Fed minutes from the meeting in December were released and it seems that they think they may need to raise rates more than expected. Or more quickly than expected. Keep in mind that as far back as I can remember (Alan Greenspan), the Fed sometimes uses their words to cool the economy as much as their actions.
So here are the numbers: on Tuesday we got the December Institute of Supply Management’s number expected to be 54% vs the 53.2 for the month before. Came in a lot stronger than expected at 54.7%, which was too good, making interest rates rise a bit. Wednesday, the minutes from the Fed meeting that I mentioned. Thursday, ISM service numbers were in line with expectations, but retailers announced their holiday numbers. The big box stores did not do as well as expected, sending shocks through the markets. Some stores were down 20-30% year over year. Most notably Macy’s (Macy’s had already announced layoffs last August and increased that number now including the sale of some of that real estate), and Sears, forcing them to sell off their Craftsman line. What did do well was the online stores. Their business increased 40% in some cases year over year. Yes, if you spoke to Fed Ex and UPS drivers you knew that was happening as it was happening. So you might think with the slower sales and soft jobs reports that it was bad news for the economy but the Fed Ex and UPS guys had already been staffed up and worked lots of OT… I say wait a month and see how the numbers shake out.
On Friday we got the monthly jobs report for December: expectations were 175,000 vs prior month 178,000 unemployment at 4.7% vs 4.6, and avg hourly wage expected to go up 0.1% as opposed to the -0.3% for the previous month. The results were 156,000 (big miss) 4.7% unemployment, and a rise in average hourly wage of 0.4%. The “happy news” in there was not good for rates today.
I think, that especially this month, will probably be revised drastically because of the short month and end of year being on a weekend – stay tuned…
So with a bad day and a good day, rates were fairly flat.