Threading the Economic Needle

The U.S. payroll report released last week revealed that the unemployment rate had risen to 4.1 percent, the highest since November of 2021. A fair-enough number in most any economic time, but if rising unemployment continues to be the trend, it will start to be a concern. That was the bad or mediocre news.

The good news was this week with the June monthly CPI (Consumer Price Index) report showing a decline of 0.1 percent month on month and a reduction to three percent year over year, versus 3.3 percent in May. CPI at three percent is the lowest level it’s been in more than three years.

It may finally, finally be time for the Fed to genuinely look at cutting interest rates, and very possibly before the end of the year, if the latest unemployment and inflation trends continue.

Equity reactions to the inflation data were mixed, with both the front-month Nasdaq and S&P indices reversing off early contract highs to finish lower on the day, while the Dow Jones remained steady to higher. Talk of traders potentially rotating from tech/AI stocks, whose rally may be overdone in the short term, to more classical business stocks that have not soared in price recently (which could benefit it from a lower interest environment) was the justification for the move.

Cocoa Slipper Still Fits

The 2024 Commodity Cinderella is still riding high in the historical price range. While no longer the media darling of the commodity complex, the price continues to grind in wide sideways range between $11,000/ton and $7,000/ton, with September Cocoa futures currently trading around $8,400/ton. The excitement of the initial bull run has subsided, but a 7-11 trade range is hardly a convenient landing/staging area for market participants trying to position for whatever comes next.

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