Market Moment

  • March 19, 2019 Fed Meeting Yet to Start; Markets Can't Wait by Lester Murray

    The FOMC will begin its regularly scheduled meeting later today, but financial markets are already looking ahead. Those in the know don't expect any rate changes, but many are looking for revised plans that could possibly bring an end to planned balance sheet reduction. The reversal of massive bond purchases accomplished through the policy tool known as Quantitate Easing has had the effect of tightening monetary conditions in a way not related to the policy rate. This week's meeting is not expected to produce any rate changes, but a new Summary of Economic Projections, and a new  "dot-plot", might provide some insight into how policy-makers see things playing out. Observers should have their grains-of-salt ready.

    In the meantime, equity markets seem to be anticipating something they might like, while bond investors might be bracing for something they might not. As always, the post-meeting statement, in addition to Chairman Powell's Press Conference, will be rigorously scrutinized for clues. No doubt, some will be found even if they aren't really there. The Ten-Year's yield has moved up a couple of basis points, but that still leaves it pretty close to 2.60%.  Factory Orders have already come in with some disappointing data for the data-driven Fed with Durable Goods Orders also failing to meet expectations.

  • March 15, 2019 Bonds Like the Early Morning News by Lester Murray

    The news hitting bond markets this morning is not particularly inspiring, and bonds are liking it.  Ten-Year yields have slipped below 2.60% after the disappointing release of a big miss by the Empire Manufacturing Index.  The expected move up to 10 from 8.8 became a major slide to 3.7. Industrial Production was supposed to show growth of 0.4% last month but all we got was 0.1%.  A similar Manufacturing Output report from the Federal Reserve fell 0.4% when a slight gain was expected. Not a good morning for expectations. Adding to the dismay, negative economic reports from the Bank of Japan and the Peoples Bank of China make it tough to spin anything into good news. A little later this morning we'll get Consumer Sentiment from the U of M and it is expected to show improved outlooks. We'll see.

  • March 12, 2019 Inflation Misses While Brexit Awaits by Lester Murray

    Bond prices are up slightly as last week's undershoot of the Personal Consumption Expenditures (PCE) Index was, unfortunately, backed up by this morning's undershoot of the Consumer Price Index. For February, "core" CPI rose by half of the expected 0.2% and that led to a year-over-year decline to 2.1% from 2.2%. Better news could be found in the report of a 0.2% increase in the year-over-year growth rate of Real Average Hourly Earnings from 1.7% to 1.9%. The softness in CPI and other inflation measurements supports the cessation of FOMC rate hikes as the disinflationary trend lands up raising the "real" policy rate even as the Fed pauses.  The Ten-Year's yield is a couple of basis points lower as a result and is trading in the low 2.60%'s as lunch hour begins. Other sources of disquiet include the upcoming Parliamentary Brexit vote as that situation continues to not play out. Equities are suffering quietly as pressure on Boeing mounts.

  • March 8, 2019 A Swing-and-a-Miss: February Jobs by Lester Murray

    For those playing the expectations game, the 20k increase in Non-Farm Payrolls was nowhere near the 180k that experts were predicting for this morning's release of the Labor Department's February Jobs report. But, through the magic of statistics the Unemployment Rate fell by two-tenths to 3.8%.  The best news was the 3.4% rise in year-over-year Average Hourly Earnings; slightly larger than expected. Average Weekly Hours fell by 0.1. The Labor Force Participation Rate held steady at 63.2% while the U6 "Underemployment Rate" plunged to 7.3% from 8.1%. The Civilian Labor Force fell by 45k and the number of those not in the Labor Force grew by 198k. Stocks are opening weaker on the news while bonds continue yesterday's rally. Treasury's Ten-Year yield is just a nudge over 2.60%

  • March 6, 2019 Data Drives Dow Down; Bonds Like It by Lester Murray

    The road to diminishing trade deficits is paved with good intentions, but those good intentions do not seem to be helping. The nation's export/import deficit widened to a 10-year high in December as that month's imbalance alone came in at -$59.8B, or about $10B greater than expected. In addition, investors learned that Mortgage Applications fell 2.5% last week and, as a sometimes precursor to the BLS report scheduled for Friday, the ADP private payroll report showed a smaller increase in its calculation of job growth than experts expected.

    And out of Europe, Brexit battles continue unabated and demands for a second referendum grow louder and more insistent.  Yet another vote on a workable plan to separate from the EU is scheduled for next week and yet another defeat for the beleaguered Prime Minister is likely in store. The European Central Bank, meanwhile, is likely to cut its economic forecasts for the EU.  Mario Draghi, head of the ECB, will be making a public statement about monetary policy on Thursday. Domestically, sentiment over the ebbs and flows of a trade agreement with China has investors ebbing and flowing right along with it. The Dow is off about 100 points at the moment while an upward edging of bond prices has pushed the Ten-Year's yield back below 2.70%. 

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