Good Friday AM,
Lots of economic data out today and it all beat expectation. I’m including the bullet points below. The biggest of which is the PCE, which is the Fed’s favorite inflation gauge. In most months, data this strong would have sent bonds a tumblin’… Not today though as Chairman Powell set expectations at Wednesday’s press conference that this week’s data would be strong and that it would also be unimpactful to the Fed path. So… bonds staying strong today after yesterday’s big improvement. The 10-yr is at 1.63%, and while up a few basis points this week, mortgage bonds have held steady. Sometimes flat is just fine. Stocks are taking it on the chin today. Nothing huge but it’s clear some profit taking is happening.
- PCE 0.5 vs 0.3
- Core PCE 0.4 vs 0.3
- Pers Income 21.1 vs 20.3
- Pers Spend 4.2 vs 4.1
- Chicago PMI 72.1 vs est 65.3
- Consumer Sentiment Index 88.3 vs est 87.5
The jump in personal income is also pretty interesting. The majority of it came from the $1400 stimulus… here is a great graph on that:
Some additional help from bonds came from across the Atlantic. As reported today from Eurostat, the European Union’s statistics agency, the Eurozone economy shrank at the beginning of 2021 for the second consecutive quarter, entering its second technical recession in a year. Across the 19 countries that use the euro as their currency, gross domestic product fell by 0.6% in the first quarter. The latest contraction largely reflects continued restrictions on services activity in response to high rates of Covid-19 infection.
…and a note on student loans. $500 billion — The estimated amount in defaulted student loans that U.S. taxpayers could end up on the hook for, according to an outside analysis commissioned in 2018 by then-Education Secretary Betsy DeVos. The report, compiled by a former JPMorgan executive, found that defaults have become more likely over the past three decades, even as federal officials have made the loan program appear profitable.
Please remain safe and healthy, enjoy the weekend and first, make today great!