Markets edge higher after remarks from Fed Governor Waller

Dow went up 129, advancers over decliners 3-2 & NAZ rose 10.  The MLP index crawled up to the 254s & the REIT index added 1+ to the 359s.  Junk bond funds edged higher along with stocks & Treasuries had modest buying which slightly reduced yields (more below).  Oil rebounded 1+ to the 76s as the important OPEC+ meeting on Thurs looms & gold jumped 19 to 2032, nearing its record high.

AMJ (Alerian MLP Index tracking fund)

 

Online shoppers who took advantage of Black Friday spent enough with retailers to set a new record this year, according to Adobe Analytics.  The company said online Black Friday shopping sales came in at $9.8B.  It climbed 7.5% from the total that Black Friday online shoppers forked over in 2022.  Last year, consumers spent $9.2B online on the day after Thanksgiving.  "The decline in online prices over the last year has created a favorable environment for consumers with strong discounts this season that are tempting to even the most price conscious consumers," Adobe Digital Insights lead analyst Vivek Pandya said.  Purchases of electronics in particular contributed to this year's Black Friday online sales, climbing 152% from their daily averages in Oct.  Many consumers picked up smartwatches, TVs & audio equipment.  Buy Now, Pay Later has been an increasingly popular option for shoppers, with Adobe Analytics reporting a 20% year-over-year increase in online customers using it over the weekend.  On Cyber Monday, online consumers are projected to choose this method for $782M worth of shopping.  Total online sales on Cyber Monday could wind upcoming in at $12-12.4B, setting the day up to break a record of its own, Adobe Analytics also predicted.

Black Friday online sales reach record level, according to Adobe Analytics

Federal Reserve Governor Christopher Waller said he's growing more confident that policy is in a place now to bring inflation back under control.  There was nothing in Waller's prepared remarks for a speech that suggests he's contemplating cutting interest rates & he noted that inflation currently is still too high.  But he pointed out a variety of areas where progress has made, suggesting the Fed at least won't need to hike rates further from here.  “While I am encouraged by the early signs of moderating economic activity in the fourth quarter based on the data in hand, inflation is still too high, and it is too early to say whether the slowing we are seeing will be sustained,” he said.  “But I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent.”  A subsequent speech today from Governor Michelle Bowman offered a contrasting view, in which she reiterated her belief that more rate hikes likely will be needed as evolving dynamics keep inflation elevated.  The commentary comes 2 weeks before the rate-setting Federal Open Market Committee's Dec 12-13 policy meeting.  Markets largely expect the committee to hold its key lending rate steady at 5.25-5.50%.  But Fed officials have stressed the importance of remaining vigilant on inflation & keeping their options open.  During the central bank’s ongoing battle against inflation, Waller has been one of the more hawkish members, meaning he has favored tighter policy & higher rates.  However, he titled his  speech today, “Something Appears to Be Giving,” a contrast to a recent speech titled “Something’s Got to Give.”  “I am encouraged by what we have learned in the past few weeks — something appears to be giving, and it’s the pace of the economy,” he added.  Waller cited a variety of areas where activity is moderating, from retail sales to the labor market to manufacturing.  He also noted easing in supply chain pressures that were largely responsible for the initial jump in inflation, but he said that factor can't be counted on to help bring inflation down further.  “Monetary policy will have to do the work from here on out to get inflation back down to 2 percent,” he continued.

Fed’s Waller expresses confidence that policy is in the right place to bring down inflation

Treasury yields were slightly higher, as investors awaited the release of economic data that could provide hints about the economic outlook.  The 2-year Treasury yield was up by about 3 basis points at 4.885% & the 10-year Treasury  yield was 2 basis points higher at 4.4%.  Yields & prices have an inverted relationship & 1 basis point equals 0.01%.  Investors weighed the prospects for the economy, as they looked ahead to various economic reports scheduled this week that could signal upcoming monetary policy decisions from the Federal Reserve.  Markets are widely expecting the central bank to have hit the end of the interest rate hiking cycle that it began in early 2022, but questions linger around how long rates will stay elevated & when they will be cut, as recessionary fears persist.  Fed officials have in recent months repeatedly indicated that monetary policy will remain restrictive until policy goals are met & have provided no signs of when rate cuts may be announced.  Recent data has suggested that higher rates are having the desired effect & inflation is easing, although it remains above the Fed's 2% target range.  The latest reading of the consumer price index reflected a year-on-year increase of 3.2% in Oct.  Fresh inflation insights are expected on Thurs by way of the personal consumption expenditure price index, a key data point for the Fed.

Treasury yields inch higher as investors consider economic outlook 

Dow was flattish in the first hour.  Then Waller's comments brought in some buying although it is being done carefully.  The data on Fri's online sales (see above) was encouraging.  More data & comments are coming this week.

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