Futures are off sharply on a very stagflationary offering of economic data. Q1 GDP rose at only 1.6% versus expectations of 2.4%, while core PCE prices rose 3.7% against expectations of 3.4%. The PCE index itself is due out tomorrow.
Meanwhile, the Labor Department reported that unemployment claims for the week ended April 20 came in at 207,000 versus 215,000 expected and the 212,000-222,000 which have been reported in the past 6 weeks.
Weaker than expected economic data, combined with stronger than expected inflation and employment, places the FOMC in a difficult position and a market which has been counting on lower interest rates downright bearish.
Despite a strong showing in March, the SPX is right back where it was the last time we wrote about stagflation in February [see: Stagflation Fears Renewed.]
About the only silver lining in our charts is the 10Y, which has reached our 4.738 target several weeks earlier than expected. The resistance at this level could make a difference for stocks.
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