And a good Friday AM to you,
A relatively robust day for data.
Most of it on the money: Personal Income 0.3 on expectations of 0.2, Personal Spend 0.0 on expectations of -0.1, PCE MOM 0.1 on expectations of 0.3, Core PCE MOM 0.3 on expectations of 0.3, and Consumer Confidence at 63.5 on expectations of 63.5. The data confirming continued weakness in the economy, essentially clawed back all of yesterday’s losses. The 10 yr note is back at that 3.45%, Fibonacci retraced line in the sand. It’s getting coiled up to spring next week on what the Fed has to say on Wednesday. Then maybe another spring with next Friday’s jobs report and then another with the CPI release on 5/10. That’s the next 10 days folks, and is setting up May to be a potentially really good month for rates. We need it but don’t think it can’t turn on us as well. It can. Be defensive, not complacent and know if rates do drop, the limited avail properties will be gone quickly. Buy the dip now as there will not be a dip shortly.
A commentary from Dr. Elliot Eisenberg last night shared that banks are currently experiencing rising deposit costs. If those costs can’t be fully passed to borrowers, profits will fall, reducing lending. It’s estimated that a 10% reduction in profits reduces lending by regional and smaller banks by 2%, and based on prior rate hiking cycles, a 4% lending reduction is possible. That’s likely to lead to a painful reduction in GDP growth of as much as 0.4%!
And the government is taking some ownership in a recent bank failure.
The Federal Reserve’s banking supervisors failed to take forceful action to address growing problems at Silicon Valley Bank before it collapsed last month, the central bank’s top regulator said, signaling a broad push to toughen rules on the industry. Michael Barr, the Fed’s vice chair for supervision, said supervisors didn’t fully appreciate the extent of the vulnerabilities as SVB grew in size and complexity. When supervisors did find risks, they didn’t take sufficient steps to ensure the firm fixed those problems quickly enough, he said in a report Friday. Tougher reform means tighter lending further slowing the economy.
I’ll leave it here today.
Please remain safe and stay healthy, make today great!!!