Unadorned Notes: October 17-20, 2024
Jobless Claims Decline Unexpectedly; U.S. Retail Sales Rise; Home Builder Confidence Rises Again; Banks Report Strong Profits; Tech Giants Drive Nuclear Surge
Economics, Finance, and Business
Jobless Claims Decline Unexpectedly: U.S. initial jobless claims fell by 19,000 to 241,000 for the week ending October 12, 2024, despite forecasts of 260,000, according to the Labor Department. The previous week’s rise in claims was attributed to Hurricane Helene, which impacted Florida and the Southeast. However, claims could increase in the near term due to Hurricane Milton’s effects. A strike by 33,000 Boeing machinists, along with broader supply chain disruptions, is further complicating labor market trends. The Federal Reserve is expected to weigh these dynamics cautiously, with a smaller interest rate cut anticipated in November 2024.1
U.S. Retail Sales Rise: U.S. retail sales increased by 0.4% in September 2024, driven by lower gasoline prices and higher consumer spending at restaurants, bars, and clothing stores, according to the Commerce Department. Online purchases, health, and personal care sales also saw gains, while electronics and appliance sales fell 3.3%. The economy is supported by strong income growth, household savings, and a tight labor market despite slowing job momentum. The Atlanta Fed raised its third-quarter GDP growth estimate to 3.4%, up from 3.2%. The Federal Reserve is expected to cut rates by 25 basis points in November 2024, as resilient consumer spending continues to bolster the economy.2
Home Builder Confidence Rises Again: U.S. home builder confidence increased to 43 in October 2024, up from 41 in September 2024, according to the NAHB/Wells Fargo Housing Market Index. Despite the rise, volatile mortgage rates and low affordability continue to challenge the housing market. The average 30-year fixed mortgage rate jumped to 6.32%, reflecting broader economic pressures, including strong employment and inflation data. Sales expectations over the next six months improved, with sentiment rising to 57 in October 2024. Builders cutting prices remained steady at 32%, with average price concessions at 6%.3
Banks Report Strong Profits: Major U.S. banks exceeded third-quarter profit expectations, including JPMorgan, Wells Fargo, Citigroup, Bank of America, and Goldman Sachs. While profits were strong, banks set aside more funds for potential credit losses, signaling caution amid economic uncertainty. JPMorgan’s net interest income grew 3%, but Wells Fargo saw a decline, reflecting rising deposit costs. Investment banking and wealth management divisions performed well, with notable gains for Goldman Sachs and Bank of America.4 American Express also surpassed expectations, raising its full-year profit outlook despite increasing provisions for credit losses.5
Markets React to Tight U.S. Race: Financial markets are responding to the narrowing U.S. presidential race between Donald Trump and Kamala Harris, with assets like small-cap stocks and bitcoin rising. The Mexican peso and Treasuries have slipped, reflecting concerns over Trump’s proposed tariffs and economic policies. Trump’s improved odds in betting markets are seen as boosting pro-cryptocurrency sentiment, with bitcoin up 12% since October 10, 2024. Private prison stocks and Trump-linked companies have surged, while the Russell 2000 index is up 4% amid optimism for lower taxes and regulation. Analysts caution that strong economic data and recent Fed actions are also influencing these market moves.6
Tech Giants Drive Nuclear Surge: Shares in U.S. nuclear energy companies surged after Amazon and Google signed landmark deals to deploy small modular reactors (SMRs) for powering AI data centers. SMR developers Oklo and NuScale saw stock prices soar by 99% and 37%, respectively, as investor confidence in nuclear energy rebounded. The agreements reflect growing skepticism that renewables alone can meet the rising power demand from data centers, driving renewed interest in nuclear power. However, critics warn that SMR technology remains untested and faces regulatory and cost challenges. Despite the risks, the tech industry’s support is seen as a potential turning point for nuclear energy’s future.7
Nobelists’ Work Aligns with Bidenomics: Daron Acemoglu, Simon Johnson, and James Robinson won the 2024 Nobel Prize in economics for their research on the impact of societal institutions on economic growth. Their work, particularly the 2001 paper “The Colonial Origins of Comparative Development”, emphasizes how institutions shape economic outcomes and aligns with the Biden administration’s focus on middle-out growth, inequality, and innovation, per
. The administration’s economic advisors celebrate their contributions as foundational to Bidenomics. AJR’s research supports policy shifts toward industrial policy and clean energy, stressing the role of inclusive institutions in fostering innovation. This approach reflects a broader intellectual trend in Washington, merging historical analysis with modern policy needs, particularly in the U.S.-China relationship.8U.S. Politics and Geopolitics
Secret Service Needs Urgent Reform: An independent review of the July 13, 2024, assassination attempt on Donald Trump criticized the U.S. Secret Service for being “complacent” and “bureaucratic”, recommending reforms to prevent future incidents. The report cited systemic flaws, including poor communication, lack of leadership, and inadequate security planning. It called for specific changes, such as overhead surveillance at outdoor events and improved coordination with local law enforcement, to be implemented by March 2025. The Butler incident led to the resignation of the Secret Service director and heightened security for Trump’s rallies. Acting Director Ronald Rowe acknowledged the shortcomings and stated the agency is modernizing and seeking additional funding to address these issues.9
Hamas Leader Yahya Sinwar Killed: Yahya Sinwar, Hamas’s leader and mastermind of the October 7, 2023, attacks, was killed by Israeli forces in Rafah, Gaza, during a chance encounter. Israeli troops initially engaged three men in a routine patrol, only later discovering one was Sinwar. His identity was confirmed through DNA tests after part of a finger was sent to Israel for analysis. Sinwar had been hiding in tunnels for over a year, evading Israeli forces, but no hostages were found with him at the time of his death. Israel emphasized that while this was a major victory, the war against Hamas would continue.10
U.S. Probes Leak of Israel Plans: The U.S. is investigating the leak of top-secret documents detailing Israel’s plans for a potential strike on Iran. The documents, marked for “Five Eyes” allies, circulated online and reveal Israeli military preparations, including munitions movements and air force exercises. One document mentions Israel’s unconfirmed possession of nuclear weapons, but no plans to use them. The leak raises concerns about trust and coordination between the U.S. and Israel. An FBI-led investigation is underway to determine how the classified information became public.11
