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May 1, 2019

Volatile Fed Day Leaves Short Term Rates Higher, Equities Lower

 

Fed leaves rates unchanged, but statement and press conference whipsaw rates markets. The Fed’s decision to cut the little-known IOER (interest on excess reserves) by 5 basis points was initially interpreted dovishly by markets with rates falling as much as 4 basis points in the immediate aftermath of the announcement. However, rates reversed course once the press conference began as Powell characterized the drop in inflation as “transient” – undermining the case for a rate cut this year. Powell sounded equally optimistic when describing the diminished risks...

April 30, 2019

Rates Fall Ahead of FOMC Rate Decision

 

Treasurys rally ahead of action packed Wednesday. Treasurys rallied across the curve, yields falling 2-3 basis points despite a positive day for equities. Swap rates followed Treasury yields lower, many pointing to the relatively weak Chicago PMI number as the main culprit. Tomorrow, markets will get a host of data in the form of US manufacturing PMIs’s and the latest ISM manufacturing figure. That’s followed in the afternoon by the FOMC’s rate decision and the ensuing Fed press conference. Fed funds currently imply a 0% likelihood of a rate hike and a 2.6%...

April 29, 2019

Equities Hit New Records as Inflation Underwhelms

 

US equities edge higher to new records. Speculation that the Fed will maintain its accommodative monetary policy helped lift US equities to new record highs. The S&P 500 closed 0.1% higher to close at 2,943 while the tech-heavy Nasdaq composite rose 0.2%. Today, office space provider WeWork also disclosed it has also filed paperwork to go public, joining the string of large tech companies going public in a banner year for tech IPO’s.

 

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April 26, 2019

Strong GDP Print Leads to Mixed Market Reaction

 

US economy grows by 3.2% in first quarter, crushing expectations, but composition of growth concerns markets. U.S. economic growth got a strong boost from inventories and trade in the first quarter, but both of these factors may weigh on growth later in the year. Consumer spending, arguably the most crucial component of GDP, grew at its slowest pace in six years--- a worrying development for those who believe the ten year economic expansion may be nearing an end. Bond markets rallied on the day as shorter-term treasury yields fell 5 basis points while longer-term...

April 25, 2019

Equities Move Sideways, Rates Rise on Busy Earnings Day

 

Durable goods orders grow 2.7%, nearly triple the forecasted rate of 0.8%. The acceleration in demand for durable goods bodes well for the US’s industrial sector--potentially signaling stronger demand in autos, planes and other goods. Treasurys immediately sold off on the news, both Treasury yields and swap rates ending the day 2 bp higher across the curve. Tomorrow, investors will get their first look at first quarter GDP growth. Consensus estimates call project the economy grew at 2.3% y/y pace in the first quarter.

 

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April 24, 2019

Rates Continue to Fall as Equities Pare Gains

 

US equities take a breather after record day. Earnings were somewhat disappointing, industrial names like Caterpillar and Boeing both missing estimates and revising their forward guidance lower. After the close, Facebook reported that it has set aside nearly $3 billion to pay for an expected FTC fine for violating privacy laws, the stock falling 0.65%. The Dow Jones Industrial Average and S&P 500 both closed down 0.22% on the day.

 

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April 23, 2019

US Equities Close at Record Highs as Earnings Get Underway

 

S&P 500 and Nasdaq Composite hit record highs as earnings season begins. The S&P 500 has risen nearly 17% in 2019 and is now up 25% from its lows at the end of last year. Today’s move higher was attributable partially to strong earnings from P&G, Twitter and others. The move into record territory has come despite more pessimistic signs from bond markets, the yield curve remaining flat since the start of the year.

 

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April 22, 2019

Equities and Rates Move Sideways Ahead of Big Earnings Week

 

Earnings-heavy week starts out mixed. The S&P 500 rallied to close up 10 basis points at 2,913 while the Dow Jones Industrial Average sold off 0.18%. US equities were led higher by energy and communications sectors, with real estate and materials stocks lagging behind. Looking ahead, this week will see 150 companies from the S&P 500 report their Q1 performance. Tomorrow morning investors will get earnings from Twitter, Snapchat and State Street Bank (among other names).

 

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April 18, 2019

Rates Fall in Holiday Shortened Session

 

Rates decline in volatile session. Weak PMIs in Europe and the US sent rates tumbling lower in the holiday-shortened session. Treasury yields fell 2-4 basis points across the curve, the 10 year Treasury yield falling to 2.56%. The MOVE Index- a measure of interest rate volatility- rose to 48.7, maintaining its sustained level above 45. Fed funds futures now imply a 51.8% likelihood of a rate cut by 2020.

 

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April 17, 2019

US Equities Pulled Down By Healthcare Stocks, Rates Move Sideways

 

Fed’s recent comments show renewed focus on disinflation risk. In a sharp contrast to the “Yellen” Fed, Chair Powell and his cohort appear increasingly focused on the risks surrounding disinflation. Inflation has failed to meet the levels seen in previous cycles, and as a result Fed officials like Chicago Fed President Charles Evans seem increasingly willing to hold off on future rate increases, or even institute a rate cut if inflation softens. With the unemployment rate and jobless claims at multi-decade lows, the Fed will let inflation levels dictate future...

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