Futures are up modestly following the Feb PCE print: 0.3% monthly vs 0.4% expected and 5.0% annual versus 5.1% expected. Core came in at 0.3% and 4.6%.
In addition to inflation continuing to fall, the spread between headline and core continues to fall, reflecting an ongoing convergence.
Will it hold up next month, when the YoY gas price delta plunges to -19%, the lowest since Nov 2020 when CPI stood at 1.17%?
continued for members… (more…)
This morning’s economic news came in pretty much on target: not too hot, not too cold.
continued for members… (more…)
Futures are up nicely on a twofer: a not so subtle VIX breakdown… 
…and a very unsubtle NKD rescue (back above the SMA200 just in time for Q1) courtesy of the BoJ’s USDJPY meddling.
continued for members… (more…)
Futures are off marginally as the major indices coast into the end of Q1.
continued for members… (more…)
Our yield curve model sounded the alarm on Friday. But, by the end of the day, it had backed off and cooler heads prevailed.
It’s important to recognize, however, that it remains on the bubble, with only a few basis points standing between a rally and another leg down. From a fundamental standpoint, there seems little doubt that the odds of a recession are on the rise.
continued for members… (more…)
Our yield curve model has finally sounded the alarm.
continued for members… (more…)
Futures have rebounded about 0.5% following yesterday’s roller coaster session that saw SPX backtest its SMA200.
continued for members… (more…)
The situation is pretty clear. By raising rates, the FOMC could continue to fight inflation but would also exacerbate the banking crisis. By pausing, the FOMC could give banks a little relief but would loosen financial conditions – thereby making it tougher to reduce inflation to target.
The seldom discussed situation is what impact the Fed’s decision would have on equity markets. This unspoken third mandate often weighs more heavily on decisions than do full employment and price stability.
From that standpoint, we look for the Fed to either: (a) pause but stress that the pause is due to rapidly tightening financial conditions which are inherently disinflationary; or, (b) raise 25 bps but stress that this could be the last hike for a while because they believe inflation is headed significantly lower due to tightening financial conditions.
Our own research indicates that this is true. Gas prices, which are very highly correlated with CPI, are slated to fall 18.6% YoY in March. The last time the YoY delta hit this level was in Nov 2021 when CPI registered 1.17%.
Obviously, other stickier factors have usurped the inflation narrative: wages, real estate, cars, etc. But, as we’ve discussed often in these pages, many of these other categories have been fairly flat or have declined over the past year – meaning that their YoY deltas are also falling rapidly.
Consider food prices, still elevated at 9.5% YoY in Feb.
Underlying prices, as reflected in the DBA agricultural ETF, have fallen 11.3% over the past year. As long as it remains in the very tight trading range it’s been in since Jun 2022, the YoY decline will reduce inflationary pressures just as oil/gas have.
Futures have been vacillating around unch all night. The real action should start at 2PM with the announcement, followed by Powell’s press conference at 2:30.
continued for members… (more…)
While the investing world argues whether the FOMC will or should raise rates a whopping 25 bps, the bond market is sending a strong message that markets are on the brink of a significant move.
Futures, drawn higher by the usual pre-meeting meltup, are oblivious.
continued for members… (more…)
Futures have rallied off their overnight lows as markets digest the very messy implications of the Credit Suisse situation.
continued for members… (more…)
