Market:

• S&P index up +1.26%
• NASDAQ index up +1.77%
• Crude oil up $0.86 and $73.98.
• Gold down $-19.08 or -0.72% at $2638.45
• Bitcoin is up $1400 at $98,314

In the US debt market, yields are higher with the shorter end up the most:

• US 2Y T-NOTE: Yield: 4.2807%, Change: 3.3 bps
• US 3Y T-NOTE: Yield: 4.3222%, Change: 3.8 bps
• US 5Y T-NOTE: Yield: 4.4136%, Change: 3.4 bps
• US 10Y T-NOTE: Yield: 4.5995%, Change: 2.5 bps
• US 30Y T-BOND: Yield: 4.8141%, Change: 1.6 bps

In the US trading session today, the ISM Manufacturing PMI came in stronger than expected of 49.3 versus 48.4 estimate.. That was a highest level since March when the index peaked at 50.3. Before March, the last time the index was above the 50 level was October 2022. The low for 2024 was in October at 46.5.

The forward new orders index reached 52.5 which equaled the highest level for 2024 (reached in January 2024). Both months were the highest levels going back to May. 2022. The low for 2024 was at 44.60.

The not-so-good was at the prices paid index reached 52.5. Although lower than the high level from April at 60.9, it is also above the low for the year at 48.0 reached in September.

The employment component softened to 45.3 with a 2024 low of 43.4 reached in July, and a 2024 high of 51.10 reached in May 2024.

Two Fed members spoke today. Richard Fed Pres. Barkin spoke in the morning. While Fed Governor Kugler spoke shortly after the US stocks closed with CNBC.

As for Barkin, he:

Conveyed a cautiously optimistic outlook for 2025, highlighting a positive baseline with more upside than downside risks to growth. He emphasized that strong employment and asset values are critical for sustaining consumer spending. While inflation remains above target and requires further work, Barkin noted that core underlying inflation is showing signs of improvement and expects 12-month inflation to decline due to base effects.

He pointed out that monetary policy in 2025 will likely take a back seat to economic fundamentals and geopolitics, with the Fed well-prepared to respond as needed. Barkin acknowledged reduced financial market uncertainty and a growing understanding that long-term rates may not decline as much as previously expected, partly due to the pressures of rising U.S. debt. He also mentioned healthy housing demand relative to supply and the likelihood of a labor market favoring increased hiring over layoffs.

Despite these positives, Barkin identified risks, including potential upside risks to inflation and businesses’ concerns about how changes will impact their operations. He stressed the need to remain restrictive for longer, given inflation risks, and indicated that conditions for rate cuts would require confidence in inflation’s return to 2% or a weakening of demand. Additionally, he noted that consumers are becoming more price-sensitive and that the pass-through of tariffs to prices is complex, depending on supply chains and consumer price elasticity. Overall, Barkin underlined the need for vigilance while navigating the economic challenges ahead.

For Fed’s Kugler, she:

Shared an optimistic outlook on the U.S. economy, emphasizing its resilience and strong end to 2024. She noted that the process of disinflation is ongoing, supported by a gradually cooling but stable labor market, with historically low unemployment and rising real wages. Kugler highlighted productivity as a key factor in maintaining a healthy economy with disinflation and expressed optimism about its future role. While immigration has been helpful in balancing the labor market, he acknowledged uncertainty around future immigration trends and the economic impact of tariffs, which may depend on their permanence.

Kugler also emphasized the Fed’s cautious approach, as it navigates a wide range of economic scenarios and monitors inflation pressures, which could remain sticky. She reiterated that policy decisions will remain data-driven and suggested that the Fed has the flexibility to take its time when considering future rate cuts. He declined to comment on the policies of the incoming administration, focusing instead on the broader economic picture.

The US dollar was lower versus all the major currencies with the exception of the CAD. The CAD was the strongest of the major currencies. A snapshot of the changes of the major currencies verse the US dollar shows:

• EUR -0.42%
• JPY -0.16%
• GBP -0.32%
• CHF -0.44%
• CAD +0.33%
• AUD -0.13%
• NZD -0.30%

For the trading week, the USD was mixed vs the major currencies

• EUR +1.08%
• JPY -0.34%
• GBP +1.21%
• CHF +0.71%
• CAD +0.22%
• AUD unchanged
• NZD +0.28%

next week, the US and Canadian jobs report will be released on Friday. US nonfarm payrolls expected to show a gain of 154K versus 227K last month. The unemployment rate is expected to remain steady or 4.2%. Can unemployment rate is also expected to remain unchanged on the month (at 6.8%), with the employment change of +24.5 K versus 50.5 K last month.

Other data for the week includes the

• ISM services PMI on Tuesday. Expectations are 53.2 versus 52.1
• JOLTS job openings are expected to rise modestly to 7.77M from 7.74 million
• ADP Non farm employee change is expected at 131K versus 146K last month.
• FOMC meeting minutes will be released at 2 PM on Wednesday. The Fed at the last meeting decreased rates by 25 basis points but also forecast 2 rate cuts in 2025 versus 4 rate cuts in its previous estimate from September.