Some Like It Hot

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If you’re a retailer, you might be thrilled with the personal income and personal spending beat last month (0.4% vs 0.3% exp and 0.8% versus 0.4% expected.) If you’re a manufacturer, you might be pleased with durable goods coming in at a +1.1% versus the -1.3% expected.

But, if you’re a member of the FOMC, you have to be chagrined that those hot numbers, combined with hotter core and headline PCE and tightening credit conditions, will force tighter monetary conditions. The algos agreed for a few minutes, but were quickly reminded of the requirement to take their cues from VIX.

continued for members…The equity picture remains unchanged, with big declines in VIX preventing any meaningful declines in stocks…so far. Will traders willingly go into a 3-day weekend with the debt ceiling crisis still unresolved? We’ll see.

The currency picture is unchanged, with USDJPY rising and EURUSD falling, boosting DXY – but not yet enough to override VIX.

CL and RB are both bouncing, with XLE still supported and TNX getting an additional boost. Needless to say, more than a few utilities investors are rethinking the 3.23% dividend yield of the XLU in contrast with much higher treasury yields.