Market Commentary
Market Update: Data Dependent
US equity indexes were mixed on the week: S&P500 +0.95%, NASDAQ +1.74%, and DJIA -0.11%. Both market participants and the Fed are trying to finely calibrate the timing first Fed rate cut, making both excessively data-dependent. While the CPI and PPI for January surprised to the upside, PCE prices for January, released this week, came in on expectations. This result was a relief and lifted equity indexes and weighed on bond yields. It seems that the last part of the journey back to 2% inflation could be complicated, and the Fed is emphasizing data collection as opposed to having confidence in its economic projections.
Market Update: Coming in Hot
US equity indexes fell on the week: S&P500 -0.4%, NASDAQ -1.3%, and DJIA -0.1%. US January inflation data came in hot (see below). In reaction, the US yield curve shifted up and Fed rate cut pricing was further scaled back. The US 2 year yield was up 17.3bps to 4.6544% and the 10 year yield was up 12bps to 4.2949% on the week. US equity indexes were weighed on as market participants seemingly will have to wait longer for the Fed rate cutting cycle to commence.
Market Update: Blockbuster
US equity indexes were up on the week: S&P500 +1.4%, NASDAQ +1.1%, and DJIA +1.4%. Year-to-date, equity indexes are well in the green: S&P500 +4.0%, NASDAQ +4.1%, and DJIA +2.6%. Friday's January US payrolls data were blockbuster - well exceeding the consensus estimate (see below). The data are sign that US economic exceptionalism is continuing. US equity indexes rallied on the strong economic news and US Treasury yields surged in reaction. The US 2 year and 5 year yields were up about 20bps and the 10 year yield 17 bps post-release. They ended the week: 2 year: 4.3638%, 5 year: 3.9825%, 10 year: 4.0199%