Summer Friday PCE data day. What if PCE data for some reason is hot and market expectations for rate hikes are again repriced into further out in the future?
Stock narratives include: a tech re-rating around returns to AI, an unwind of Yen carry trades ahead of an expected BoJ hike, a potential slowing economy (the Dudley editorial) and political risk. Ford shares were particularily hit hard citing warranty cost. Overall it was an up and down day in equities with S&P ending in a loss and Nasdaq down again.
In data GDP beat big, coming in at 2.8% vs. 2.0% est. with higher than expected demand and higher PCE, but no one cared. Durable goods orders were weak but seemed to be driven by airline orders and jobless claims continue to be super low. The 7Y auction was solid, but yields rose from lows of day. The 2Y ended at 4.43% and the 10Y at 4.24%.
PCE will be the headline today.
XTOD: Never mind GDP – the real shocker in the data today was the core PCE deflator (+2.9% SAAR in Q2 vs consensus views of +2.7%). Unless prior revisions were the culprit, the quarterly data suggest that the June core deflator will move in the opposite direction tomorrow as the CPI did – the risk now is +0.3% MoM (consensus at +0.2%). This could well complicate the near-universal view that the Fed will start cutting rates by the Fall.
XTOD: This is your reminder that the Fed won't cut rates next week and won't cut rates by 50bp in September. My view remains they won't cut rates in September either fwiw.
XTOD: In case anyone doubted the role of carry trades on $NDX, here’s $JPY vs $NQ for the past 13 days: https://pbs.twimg.com/media/GTWXSyRXIAANyD1?format=jpg&name=900x900
XTOD: “Beauty awakens the soul to act.” ― Dante Alighieri
XTOD: “In a life properly lived, you’re a river. You touch things lightly or deeply; you move along because life herself moves, and you can’t stop it; you can’t figure out a banal game plan applicable to all situations; you just have to go with the ‘beingness’ of life.” - Jim Harrison
XTOD: Charlie Munger: "The toxic people who are trying to fool you or lie to you — who aren't reliable in meeting their commitments — the great lesson of life is [to] get them the hell out of your life. And do it fast."
https://x.com/EconguyRosie/status/1816474045485133977
https://x.com/dampedspring/status/1816457992654536990
https://x.com/SteveSosnick/status/1816524376667488372
https://x.com/Mythos_Man/status/1816571322866237938
https://x.com/OutlawsPoetic/status/1816442449658613776
https://x.com/kejca/status/1816546244753494389
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