Core PCE for July was about as expected when we include the June upward revision. Versus last year headline PCE was up by 1% vs .9% in June. Core PCE was up by 1.3% vs 1.1% in the month prior. Services continues to see steady price gains as it rose 1.8% y/o/y for a 3rd straight month. Goods deflation was still evident but less so and where I’m expecting upside …
The Day After
So #5 of my 10 flaws of inflation symmetry yesterday stated "Longer term interest rates are not just going to sit there and let inflation run hot, they will tighten for the Fed. This would then hurt the housing sector and any overindebted company." Well it took all of 30 minutes for longer term rates to begin the tightening for the Fed. I'm exaggerating here of course …
7 yr auction, rates, stocks
The 7 yr auction was pretty good. The yield of .519% was below the when issued and the level of direct and indirect bidders combined was the most since March 2019. The bid to cover of 2.47 was spot on with the one year average. Bottom line, a 7 yr maturity is in a weird spot where out to 5 yrs right now is pretty much pinned by the Fed and it still is 3 yrs from …
Home sales
Pending home sales in July rose 5.9% m/o/m, above the estimate of up 2%. This measures signed contracts of existing homes. Regionally, the Northeast was the standout with a 25% m/o/m spike. The South was up 1%, the West by 6.8% and the Midwest higher by 3.3% m/o/m. The chief economist of the NAR was ebullient, “We are witnessing a true V-shaped sales recovery …
Rates reverse higher
Reversing after the initial rally, Treasuries are at the lows of the day with yields at the highs. In particular, the 30 yr yield is now at 1.45%, the highest in 2 months. This area of the curve will best reflect market messaging as it’s furthest from Fed influence. See the key level we’re at in the chart below. The 10 yr yield is back above .70% again. I leave …
Powell speaks
Meet the new policy, same as the old policy sang The Who, or something like that, J The statement today said “The Committee seeks to achieve inflation that averages 2% over time, and therefore judges that, following periods when inflation has been running persistently below 2%, appropriate monetary policy will likely aim to achieve inflation immediately above 2% …
Claims data
Initial jobless claims totaled 1.01mm, about in line with the estimate of exactly 1mm and this is down 100k w/o/w. Pandemic Unemployment Assistance did rise for the 2nd week to 608k up from 525k last week. Continuing claims, delayed by a week, was 14.54mm vs the estimate of 14.4mm. Bottom line, claims are now hovering around the 1mm mark for each week this month …
The 10 flaws of ‘inflation symmetry’ which ALREADY is Fed policy
To be clear again, inflation symmetry has ALREADY been codified by the Fed in every single FOMC statement released this year, pre Covid and since. "The Committee judges that the current stance of monetary policy is appropriate to support sustained expansion of economic activity, strong labor market conditions, and inflation returning to the Committee's symmetric 2 …
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Bulls finally at 60/Durable goods orders
We finally got there, a 60 print for the Bulls in the weekly Investors Intelligence index. It touched that exactly on the week up from 59.2 last week. Bears fell to 16.2 from 16.5. Bottom line, anything with a 6 handle in the Bulls is considered extreme and the spread to the bears now at 43.8 certainly is. Again, combine this with the Citi Panic/Euphoria index and we …
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Consumer Confidence/Ahead of Powell
On Monday I quoted the WSJ article saying that the top 10% of earners owned 87% of all the US stocks outstanding in Q1 2020. Yesterday we saw the consumer confidence index print the lowest level since 2014 at the same time the US stock market continues vertical. Here is a chart looking at them both. The uplift in confidence since 2009 assume was all due to the …
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.