Market Still Waiting on Treasury Pick and Nvidia Earnings

• Treasury yields are a touch higher this morning as some of the fight-to-safety trades yesterday in the wake of Russian nuclear saber-rattling has cooled some today with Putin expressing interest in a Trump peace plan with Ukraine (more on that below). As candidates continue to be named for various positions in the upcoming new Administration, the Treasury secretary pick remains open and that will keep the market unsettled until a candidate is named. Also, we get the 800 lb. gorilla Nvidia reporting after today’s close which could provide some volatility in financial markets tomorrow. Currently, the 10yr Treasury is yielding 4.43%, up 5bps on the day, while the 2yr is yielding 4.31%, up 4bps.

 

• We seem to be getting closer to a Treasury secretary pick, with Trump expected to interview former Fed Governor Kevin Warsh and Apollo CEO Marc Rowan sometime today. One of the other names recently in the hunt,  Howard Lutnick, CEO Cantor Fitzgerald, has been tabbed for Commerce Secretary. So, while not Treasury he’ll at least have a seat in the room, as they say. The final selection is not likely to elicit much of a market move, as the leading candidates are from the traditional mold of Treasury secretaries, and not unorthodox figures like some of Trump’s other Cabinet picks.

 

• Meanwhile, the geo-political flight-to-safety trade yesterday that was inspired by nuclear saber-rattling from Russia has faded some today, as Putin now says he’s open to Trump’s peace plan which probably entails retaining most, if not all the land he has taken in the war. We doubt Ukraine President Zylinsky will be open to such an agreement, so expect hostilities to flare at some point.

 

• Not much on the data calendar today, but we did mention on Monday that tomorrow’s Initial Jobless Claims will carry a little more importance as it coincides with the November jobs report survey week. Claims have been docile lately with little to indicate that layoffs are accelerating. Continuing Claims, however, continue to drift higher which supports the view that while firms are not aggressively laying off workers, they are also not aggressively hiring them. See graph below.

 

•  We continue to believe the Fed will cut another 25bps at the December 18^th FOMC meeting, thereby fulfilling its September forecast of 100bps in cuts for 2024.  Despite the uncertainty about where the Neutral Rate currently resides, policy remains in restrictive territory, and as we’ve mentioned probably too many times, next year’s first quarter could see seasonally inspired higher inflation just as we experienced this year which would seem to be an ideal place to pause for a meeting or two. The futures market is mostly on board with that view with odds at 59%December cut but only 25% for a January cut.

 

• Want to put another data point on your watch list? How about bankruptcy filings. The latest report showed increasing evidence of financial distress among businesses and households. Across all six chapters of bankruptcy protection, 134,037 cases were opened in the third quarter– the most during any quarter since the beginning of 2020. The rolling 12-month total is 504,112, the highest in four years. What’s more, the annual pace of filings has increased during every quarter over the last two years, although it must be said they remain well below historical extremes. In any event, with the upward trend in filings off cycle lows pretty clear, the ongoing trend warrants some attention in coming quarters.

 

• Finally, four Fed speakers will provide their thoughts today, although not the A-List of Committee members: Barr (voter) testifies before the US Financial Services Committee. Cook (voter) speaks on the economic outlook and monetary policy. Bowman (voter) speaks on the “approach to agency policymaking.” Collins (non-voter) participates in a conversation about monetary policy.

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Will Continuing Claims Continue to Drift Higher?