Consumer prices rose 0.1% month over month (m\/m) in November, as the impacts of much lower gasoline prices offset broad increases in most other categories. Economists were expecting another doughnut (0% m\/m), however, identical to October\u2019s read. Core prices, which exclude food and energy and are more sensitive to services, didn\u2019t receive the benefit of sharp cost relief at the pump and rose 0.3% m\/m, in line with projections but accelerating from the previous month\u2019s 0.2%. On a year-over-year basis, the headline figure rose 3.1% while core increased 4%, exactly as anticipated and near October\u2019s figures of 3.2% and 4%.<\/p>\n\n\n\n On a worrisome note, most segments experienced cost increases, but gasoline\u2019s sharp price decline prevented much of an impact on the headline figure. Indeed, the following categories experienced the noted m\/m price increases:<\/p>\n\n\n\n Meanwhile, gasoline, apparel and new automobiles capped the increase to the headline figure with m\/m price declines of 6%, 1.3% and 0.1%.<\/p>\n\n\n\n Markets are patiently waiting for tomorrow\u2019s Fed meeting, with stock indices and bond yields mixed. Following a sharp year-to-date rally amidst loosening financial conditions, a disconnect between the number of 2024 rate cuts in the Fed\u2019s SEP versus what market players are pricing in could certainly spark volatility. Additionally, investors are relatively sanguine with the Volatility Index (VIX) having just reached its lowest level since January 2020. Furthermore, I spoke with our Chief Strategist Steve Sosnick this morning and he noted that a dot plot (SEP) that falls well short of current projections could certainly spook markets, and unless Powell is willing to disavow his colleagues\u2019 projections, he will need to spend a fair amount of tomorrow\u2019s press conference explaining why the FOMC\u2019s views are so far off the markets\u2019.<\/p>\n\n\n\n Stock indices are mixed, with the Nasdaq Composite, Dow Jones Industrial and S&P 500 indices higher by 0.3%, 0.3% and 0.1% while the Russell 2000 Index is down 0.2%. Sectoral breadth is generally positive, with all sectors higher except for energy, utilities and consumer discretionary. They are down 1%, 0.8% and 0.2%. Meanwhile, financials and materials are leading, with the sectors higher by 0.5% and 0.4%. The energy sector\u2019s sharp price decline is attributed to crude oil\u2019s battering amidst oversupplied conditions. OPEC + is struggling to convince many of its members to commit to production cuts, especially those that are in need of hard currency. This occurs as Moscow\u2019s seaborne crude exports have soared to their highest level since July. As the U.S. achieves record production and maintains robust inventory, a lack of relief from the demand side is weighing on the commodity\u2019s price. Indeed, consumption in the U.S. is slowing and Beijing, the world\u2019s largest importer of oil, is dealing with much worse economic problems, which together are contributing to less demand for barrels. WTI crude is down a whopping 3.5%, or $2.48, to $68.86 per barrel today. In fixed income and currency land, bond yields are mixed, with the short-end higher but the long-end lower, as the 2- and 10-year Treasury maturities trade at 4.71% and 4.212%, roughly 1 basis point (bps) higher and 2 bps lower, respectively. The dollar is lower, with the greenback losing value versus the yen, franc, euro, pound sterling and yuan while it gains versus the Aussie and Canadian dollars. The U.S. currency\u2019s index is down 20 bps to 103.88.<\/p>\n\n\n\n Slowing demand trends reflect the pivotal nature of consumers\u2019 finances softening this quarter. October marked an important inflection point as the exhaustion of excess pandemic savings coincided with the resumption of student loan repayments. This reduction of consumer spending capacity has stark representation in economic data with the Federal Reserve Bank of Atlanta’s GDPNow reflecting a 1.2% growth rate for the current quarter, compared to last quarter\u2019s staggering 5.2% pace. As we cross the monetary policy bridge and anxiously await the Fed\u2019s first rate cut, staying above 0% on GDP while maintaining cyclical, private sector job growth will be pivotal for keeping the expansion alive and achieving a soft landing. For now, the Fed faces the considerable challenge of maintaining its terminal fed funds rate long enough to ensure that it will dampen inflation in a sustainable manner while not tipping the economy into recession. To accomplish the mission, we need temperature neutral data during our journey across the bridge \u2013 not too hot, not too cold.<\/p>\n\n\n\n![\"\"](\"\/campus\/wp-content\/uploads\/sites\/2\/2023\/12\/Picture1-12.png\")
<\/figure>\n\n\n\nMost Categories Increased but Gasoline Saved the Day<\/strong><\/h2>\n\n\n\n
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Volatility Reaches Four Year Low<\/strong><\/h2>\n\n\n\n
Markets Await Powell<\/strong><\/h2>\n\n\n\n
Anticipation Builds for Tomorrow\u2019s Fed Meeting<\/strong><\/h2>\n\n\n\n