Hot prints, cold cuts: durables surge and claims ease—torching Fed doves as yields jump

Here’s the straight read on a data-heavy morning—and why it nudged the market’s “cut-now” camp back on its heels.

The headline beat came from

Claims data eased some labor jitters. Initial jobless claims fell to 218k (consensus 235–238k) and continuing claims dipped to 1.926 million, with both four-week averages ticking lower. The takeaway: layoffs remain subdued and the labor market is cooling in slow motion, not breaking—good news for growth, awkward for doves arguing for aggressive easing.

Growth was revised up: the third estimate of Q2 GDP printed 3.8% (from 3.3%), with final sales at a robust 7.5% and consumer spending up 2.5%. The price side nudged higher too: the GDP deflator rose 2.1% (vs. 2.0% prior est.), headline PCE 2.1%, and core PCE 2.6%. Two important qualifiers: first, this is the third revision—valuable for the growth/price mix, but backward-looking; second, the modestly hotter inflation revisions soften the case that disinflation is gliding straight to target.

Inventory and trade inputs were constructive at the margin. Advance wholesale inventories fell 0.2% and retail ex-autos rose 0.3%, pointing to orderly stock dynamics. The goods trade deficit narrowed to $85.5B, materially better than the prior -$103.6B and better than expectations around -$95.7B—supportive for net exports in Q3 arithmetic.

Zooming out to policy, the data landed amid a lively Fed debate. Governors Michelle Bowman and Stephen Miran have sounded more open to additional cuts, while Chicago’s Austan Goolsbee and Atlanta’s Raphael Bostic have warned against a rapid series of reductions given sticky inflation signals and a still-steady labor market. Chair Powell recently tapped the brakes rhetorically, highlighting “two-sided risks”—code for a cautious, meeting-by-meeting path. Today’s stronger-than-expected tape tilts that debate toward patience: growth is firm, business investment is holding up, and claims are not flashing red.

Markets voted with the curve.

So where does that leave the equity tape? Higher yields are a mechanical headwind for long-duration assets and for any corners of the market leaning on multiple expansion rather than earnings revisions. The encouraging bit is that today’s strength sits in the parts of the economy you want to see if a soft landing is the goal: core orders are firm, backlogs are growing, and layoffs remain contained. The discouraging bit, if you’re in the “more cuts, faster” camp, is that the Fed has less cover to accelerate easing without a clear deterioration elsewhere or convincing disinflation in the incoming PCE prints.

Bottom line: this morning’s data cocktail was strong where it matters for growth (durables, core capex orders, final sales) and not particularly dovish on prices (slightly firmer deflators) or labor (claims benign). In a week packed with Fed speakers, it narrows the path for aggressive near-term cuts and supports a slower, conditional easing bias. Bond yields are reflecting that reality—rising across the curve on firmer data, softer cut odds, auction indigestion, and policy noise—and that adds a headwind for equities until either inflation meaningfully cools or earnings re-accelerate enough to offset the duration drag. In other words: good economy, tougher rates—stock pickers’ market.