Lido Market Updates

16 December 2024

Monday Market Minute | 12.16.24

By Candice Richardson, CFA, Investments & Analytics
Sergio Dueñas, CFA, Investments & Analytics
As of 12.13.24 | Source: Thomson Reuters Eikon
As of 12.13.24 | Source: Thomson Reuters Eikon

Market Update

U.S. markets were a little uneasy last week as investors digested more inflation data amid an uncertain policy backdrop. While the November CPI numbers were mostly in line with expectations, the Producer Price Index (PPI) came in higher than expected. Additionally, the 10-year treasury yield bounced back to nearly 4.4%, putting pressure on equities. While the market is still pricing in a 25bp rate cut this week, rate cut expectations for 2025 have fallen given still elevated inflation combined with decent growth numbers. It’s likely that the market will remain rangebound until the new administration takes control and more details on specific policies are announced.

November CPI Inflation Print

November inflation numbers came in as expected, with headline up 0.3% for the month (2.7% year-over-year) and Core up 0.3% month-over-month as well (3.3% year-over-year). A few areas that came in strong were lodging (+3.2%), used cars (+2%), and home furnishings (+0.7%). One positive of the report is that shelter came in weaker than expected. Both rent and owners’ equivalent rent decelerated notably to approximately 0.2% month-over-month, which is the weakest reading for both components since 2021. While inflation has eased from pandemic-era peaks, recent progress has stalled, prompting Federal Reserve caution. Policymakers remain focused on broader metrics like the Personal Consumption Expenditures (PCE) Price Index, which is closer to the Fed’s 2% target due to its lower emphasis on shelter costs.

 Given that the report came in mostly in line with estimates, the Fed shouldn’t have an issue cutting rates this week. As of this morning (12/16), the market is pricing in a 99% probability of a 25bp rate cut.

 

 

Sources:

https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

https://www.bls.gov/news.release/pdf/cpi.pdf

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