Fourth-quarter economic growth came in strongly above expectations, with the second briskest pace of acceleration in 2023. This morning\u2019s Gross Domestic Product release from the Bureau of Economic Analysis reflected a growth rate of 3.3%, shattering estimates for just 2% but slowing from the third quarter\u2019s blistering 4.9% tempo. There was broad-based firmness across components. Consumption rose 2.8%, similar to the previous quarter\u2019s 3.1%, as services outlays ramped up while goods spending slowed. Investment grew 2.1%, hitting the brakes from the previous period\u2019s 10%, as homebuilder activity decelerated sharply while business investment also softened. Net exports and government spending also supported a robust headline figure, with the former contributing more relative to the last quarter while the latter gained at a more tempered level.<\/p>\n\n\n\n New home sales rose last month, propelled by lower mortgage rates that brought prospective buyers off of the sidelines. The seasonally adjusted annualized units (SAAU) reached 664,000, handsomely beating\u00a0projections of 645,000 and marking a rise from 615,000 in November. The robust 8% month-over-month (m\/m) increase benefited from significant contributions from the Northeast, up 32% m\/m, the South, up 10.6% m\/m, and the Midwest, up 9.2% m\/m. However, the West declined 3.4% during the same period. Builders relied on discounting strategies to boost volumes, however, leading to a decrease in the median sales price from $426,000 to $413,200 m\/m.<\/p>\n\n\n\n This morning\u2019s durable goods report was a big doughnut, with new orders unexpectedly stalling last month. Economists anticipated slowing growth, projecting 1.1% following November’s sharp 5.5% m\/m increase. Durable goods, excluding transportation, performed relatively better, increasing 0.6% m\/m, and surpassing expectations of 0.2% and the previous period’s 0.5%. Notably, the largest decliner was defense aircraft, dropping by 2.9% m\/m. Conversely, the leaders in the report were the communication equipment, electrical equipment, and primary metals categories, which saw gains of 5.2%, 1.8%, and 1.4%, respectively. Core capital goods, which exclude defense orders and aircraft and serve as a proxy for business investment, saw a modest increase of 0.3% m\/m, slowing from the previous month’s 1% gain.<\/p>\n\n\n\n Unemployment claims rose last week as firms continued to push cost-cutting, efficiency and productivity efforts with top-line results under pressure. The impact of descending inflation is affecting pricing power and the ability to achieve revenue growth. Initial unemployment claims rose to 214,000 for the week ended January 20, surpassing the previous week’s 189,000 and exceeding estimates of 200,000. Continuing claims also saw an uptick, rising to 1.833 million from 1.806 million for the week ended January 13, exceeding forecasts of 1.828 million. The trend for both figures, however, continued to point lower, with the four-week moving averages for initial claims and continuing claims shifting from 203,750 and 1.848 million to 202,250 and 1.835 million, respectively.\u00a0<\/p>\n\n\n\n Artificial intelligence is continuing to fuel optimism about potential growth of technology companies while a price battle has weighed upon the earnings of Tesla. Consider the following fourth-quarter earnings highlights:<\/p>\n\n\n\n Markets are bullish with all major US equity indices higher on the session while bond yields decline. The small-cap Russell 2000 and technology concentrated Nasdaq Composite indices are leading the way higher; they\u2019re up 0.6% each. The S&P 500 and Dow Jones Industrial indices aren\u2019t far behind, with the measures gaining 0.5% and 0.3%. Sectoral breadth is impressively positive, with all sectors higher except consumer discretionary and healthcare; those sectors are down 1.1% and 0.9%. The other nine sectors are higher, led by real estate, communication services and technology which are up 1.4%, 1.4% and 1.2%. Bond yields are lower ahead of a big auction. The 2- and 10-year Treasury yields are trading at 4.33% and 4.15% with the instruments\u2019 yields down 5 and 3 basis points (bps) on the session. The dollar is recovering from yesterday\u2019s losses, though, as the European Central Bank refused to discuss rate cuts at today\u2019s meeting. The result is a selloff in European currencies, as market players become nervous that the continent\u2019s nations need rate cuts right here right now. A lack of progress on inflation, however, kept Lagarde and her squad hawkish. The Dollar Index is up 33 bps to 103.59 as the greenback gains versus the euro, pound sterling, franc, yen, yuan and Aussie dollar while the US currency backtracks relative to the Canadian dollar.<\/p>\n\n\n\n Oil prices surged on today as China\u2019s decision to lower bank reserve requirement to stimulate its ailing economy with a $140 billion injection into the financial system fueled expectations that demand for energy commodities will surge. Additionally, the recent attack by Houthi forces on ships near Yemen’s coast also highlighted the risks to trade along a crucial global transit route. These factors pushed up Brent crude oil\u2019s price $1.29, or 1.6%, to $81.33 per barrel while U.S. WTI increased $1.37, or 1.8%, and hit $76.46 per barrel.<\/p>\n\n\n\n Overall, this level of economic growth alongside a tight labor market and above-target inflation is likely to make the journey across the monetary policy bridge longer and riskier, with market players now pricing in the first Fed cut in May rather than in March. A higher-than-expected Personal Consumption Expenditures report tomorrow could cement three consecutive weeks with hat tricks of robust economic data, pointing to growing disparity between investors\u2019 expectations for a rate cut and likely actions from the central bank\u2019s policymakers. Last week featured strengthening consumer sentiment, low unemployment claims and hot shopping trends during the holiday season. Yesterday saw PMI-Manufacturing turn positive and increasing momentum in PMI-Services. After today\u2019s GDP read, a hot PCE report tomorrow would be just one of many recent indicators pointing to continued upside risks in economic activity that could lead to inflation. Market direction is likely to be determined by investors focusing on either the potential for a strong economy to support earnings growth or fears that prolonged monetary tightening will challenge earnings, valuations and economic prospects. Finally, the Fed is taking notice of animal spirits in markets and is withdrawing liquidity, announcing yesterday that the Bank Term Funding Program will end on March 11 and not be extended. This development is likely to weigh on bond yields and challenge the health of regional banks.<\/p>\n\n\n\n![\"GDP](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/Picture4-2.png\")
<\/figure>\n\n\n\nDip In Mortgage Rates Supports New Home Sales<\/strong><\/h2>\n\n\n\n
![\"new](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/Picture3-7.png\")
<\/figure>\n\n\n\nGDP Growth Bypasses Durable Goods<\/strong><\/h2>\n\n\n\n
![\"durable](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/Picture2-11.png\")
<\/figure>\n\n\n\nLayoff Announcements Make It to the Data<\/strong><\/h2>\n\n\n\n
![\"unemployment](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/01\/Picture1-25.png\")
<\/figure>\n\n\n\nIBM Gains as Businesses Seek Efficiency<\/strong><\/h2>\n\n\n\n
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Market Bulls Try to Recover<\/strong><\/h2>\n\n\n\n
China Stimulus Ignites Oil Price Rally<\/strong><\/h2>\n\n\n\n
Hot Data Dampens Optimism for March Rate Cut<\/strong><\/h2>\n\n\n\n