Daily Commentary
Commentary prepared by Alloya Investment Services, a division of the wholly owned CUSO of Alloya Corporate Federal Credit Union. Alloya Investment Services is a leading broker/dealer consultant to credit unions.
Friday, April 26, 2024 at 8:00 am CT
Commentary prepared by Tom Slefinger, SVP, Director of Institutional Fixed Income Sales, Registered Representative of ISI*, Alloya Investment Services
Market Indications
Other Market Indicators
| Market Indicators | ||
|---|---|---|
| 2s/5s Tsy Spread | -0.29 | -0.01 |
| 2s/10s Tsy Spread | -0.31 | -0.02 |
| 2s/30s Tsy Spread | -0.20 | -0.03 |
| DJIA-30 | 38,085.80 | -375.12 |
| S&P-500 | 5,048.42 | -23.21 |
| NASDAQ | 15,611.76 | -100.99 |
| Dollar Idx | 105.77 | +0.17 |
| CRB Idx | 297.66 | +0.57 |
| Gold | 2,345.06 | +11.62 |
Daily Commentary
Recap – It’s been a while since a real gross domestic product (GDP) number surprised to the downside as it did in the first quarter (+1.6% versus the +2.5% consensus estimate). But the market keyed on the core price deflator, which hooked up at a +3.7% annual rate (consensus was at +3.4%). Here’s the key point. Approximately 70% of the +5.4% pick-up in service-sector prices (much of which are imputed) came from housing/utilities, financial services and health care.
Source: Bloomberg
Meanwhile, the things you can see, touch or feel, as in durable goods prices (-0.5% and deflating in each of the past three quarters) and non-durables (-0.6% after a -0.2% dip in Q4) are on a downward trajectory, but nobody seems to notice or care (outside of yours truly).
Meanwhile, the odds of a September rate cut are down to about 50- 50.Those used to be the probabilities for July just prior to the release of yesterday’s data. The first full move is now being discounted for December and basically, that is it for the year, as far as the swaps market is concerned. See “The Dream of Fed Rate Cuts Is Slipping Away” in the Wall Street Journal. Indeed, the swaps markets is now priced for a 1-in-5 chance that there is no rate relief this year, which weeks and months ago would have been unthinkable.
Yesterday’s bond market negative reaction to the data shows that the Fed has taught investors that it is not the real economy that matters, but rather, the headline inflation data. Headline and core Consumer Price Index (CPI) and personal consumption expenditures (PCE) inflation are all that matters to these folks and the factors behind the move are not as important.
The jittery bond market has settled down overnight with 10-year Treasury yield declining -2 basis points to 4.68% but not before hitting new highs for 2024 yesterday. This level, not to mention a 5-handle on the 2-year Treasury, is attracting buyers. This was evident in the not-so-bad bidding at yesterday’s 7-year Treasury auction.
As far as equities go, it’s been a fascinating earnings reporting season so far. 79% of the S&P 500 universe have managed to beat expectations on their net income, but the ones who have missed have been severely punished. It would appear that the market has become discerning as opposed to throwing darts against a speculative wall. In overnight trade, U.S. futures are up and pointing to a higher open as the mix of earnings results after the bell yesterday lined up on the positive side, led by heavyweights Microsoft and Alphabet. That said, some of the deeper cyclicals are struggling like Intel whose share price is down -7% overnight.
Have a great weekend!
Economic Calendar
April 22 - 26, 2024: The Week Ahead
Future Fed Expectations
Source: Bloomberg
| Select Probabilities based on the Futures | |
|---|---|
| Probability of Fed Funds rate CUT on May 1. 2024 | -3% |
| Probability of Fed Funds rate CUT on June 12, 2024 | -16% |
**All quoted rates are indications and are subject to change without notice.
* ISI is a member of the FINRA/SIPC.
The information contained herein is prepared by ISI Registered Representatives for general circulation and is distributed for general information only. This information does not consider the specific investment objectives, financial situations or particular needs of any specific individual or organization that may receive this report. Neither the information nor any opinion expressed constitutes an offer, or an invitation to make an offer, to buy or sell any securities. All opinions, prices, and yields contained herein are subject to change without notice. Investors should understand that statements regarding future prospects might not be realized. Please contact Alloya Investment Services to discuss your specific situation and objectives.