Daily Economic Update: May 24, 2024

Yesterday was a tough day for equities despite the previous evenings NVIDIA earnings.  The stronger than expected flash PMI's seemed to be part of the culprit as the hotter than expected reading likely pared with yesterday's "hawkish" FOMC Minutes led to higher yields.  The 10Y creeps back towards 4.50% off a local low of ~4.35% and the 2Y creeps back towards 5% off a local low of ~4.80%.

As for PMI's both manufacturing and services beat expectations and hitting fastest in 2 years, with services leading.  The concern for bond yields was that the input price readings rose sharply in May, "the rate of inflation accelerating to register the second-largest monthly increase seen over the past eight months" and in commentary provided by S&P: " What’s interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive.”

On the day ahead it's durable goods orders, UofM sentiment and Fed speak.  Ok, you can go back to AI, tariffs, elections, data-center power usage, deficits, MMT, the Yen, the Yuan, wars, and whatever else is on your mind.

XTOD: First loss on an AAA-rated slice of a CMBS deal since 2008 right here - backed by 1740 Broadway in NYC.  https://bloomberg.com/news/articles/2024-05-23/cmbs-buyers-suffer-first-loss-on-aaa-debt-since-financial-crisis by @ArroyoNieto  &  @natalexisw

XTOD: I’m always amazed that mainstream ratings agencies are able to hand out AAA ratings to single-asset loan CMBS (given that diversification is the supposed to be the bedrock of securitisation)

XTOD: We did it everyone, magnificent 1!

XTOD (See DARK MATTER): "Economics profession, they've been - they've been confident in various formulas, but economics is not physics. The same formula that works in one decade doesn't work in the next. Economics is a difficult subject."  Charlie Munger

XTOD: US to China: We raise tariffs on you. China to US: we lower yuan.

XTOD: From the DOJ complaint: “Ticketmaster Tax” "Whatever the name of the fee and however the fees are packaged and collected, they are essentially a “Ticketmaster Tax” that ultimately raise the price fans pay."

XTOD: "If you are not enthusiastic about your job, one-third of your life goes to waste." —Ingvar Kamprad (founder of IKEA)

https://x.com/tracyalloway/status/1793620448460394936
https://x.com/greg_ip/status/1793469886863417511
https://x.com/FoundersPodcast/status/1793643087715291496

https://x.com/BondHack/status/1793710931941482609

https://x.com/DonMiami3/status/1793703075842265386

https://x.com/CharlieMunger00/status/1793679281199182010

https://x.com/matthewstoller/status/1793655389378195838

https://x.com/FoundersPodcast/status/1793643087715291496