From yesterday’s note:

“As for this morning’s data releases, three things of note: “Headline” retail sales for August came in above expectations (although, “core”, not so much), which supports our mild-recession thesis, but of course doesn’t quell concerns over inflation… Same can be said about a weekly jobless claims number that came in lower for the 5th straight week…”

BCA Research touched on the jobless claims data yesterday as well:

“Recent employment data suggest that the US labor market remains extremely robust. Initial jobless claims in the week ended September 10 unexpectedly fell to the lowest level since late-May, marking the fifth consecutive weekly decline.”

And while we agree that, per BCA below, this is good news, and, again, supports our mild-recession thesis, we’re not entirely on board with the notion that, given the present market setup (i.e., how equities have traded of late), it may produce a tailwind for equities into year-end:

“An expanding labor force is ultimately positive for aggregate demand as it supports households’ incomes and thus their ability to spend. For the time being, this may create a temporary tailwind to corporate earnings and equities into year-end.”

They did however close with a comment that jibes better with our view of near-term dynamics:

“However, to the extent that good news about the economy will give the Fed comfort in favoring a hawkish policy stance, the resilient labor market is likely bad news for the cyclical outlook for financial markets.”

Speaking of the Fed, there seems to be a growing popular view among some credible macro actors that there’ll be no pivot (to easier policy) until inflation gets all the way back to their 2% target. And that they’ll be breaking the economy (and the markets) to get there.

That — that they’ll not budge till 2% inflation is the read — is not presently our take… Here’s my response to one such commentary:

“Disagree. Fedheads have been deftly stating that they need to see inflation convincingly moving “toward their 2% target.” Clearly that allows for a pivot before 2%. Something beginning to break will see inflation wane (toward 2%) allowing for a potentially aggressive easing.”

Time (weeks or [a few] months, we suspect) will tell.

And, lastly, allow me to spin the economic narrative into something potentially less-benign than our present mild-recession view.

This regarding Fed Ex hit the wires last night, taking equity index futures down with the stock:

“FedEx (FDX) withdrew its full year earnings guidance and reported preliminary first quarter results that fell short of Wall Street estimates, sending shares tumbling in extended trading on Thursday.

“Global volumes declined as macroeconomic trends significantly worsened later in the quarter, both internationally and in the U.S.” FedEx CEO Raj Subramaniam warned in the release. “We are swiftly addressing these headwinds, but given the speed at which conditions shifted, first quarter results are below our expectations.”

FedEx shares fell as much as 15% in after hours trade.”

““We are aggressively accelerating cost reduction efforts and evaluating additional measures to enhance productivity, reduce variable costs, and implement structural cost-reduction initiatives,” Subramaniam added.”