The economic surprises keep piling up on the negative side of the ledger as the Federal Reserve persists in tightening policy or at least pretending that it is. If a rate changes in the wilderness can the market hear it? All evidence points to the nonsensical idea that interest rates need to be raised so the Fed will have room to cut them later.
Unfortunately, that is as logical as monetary policy gets these days.
Unlike Yellen we here at Alhambra do pay attention to what the bond market is telling us. The Fed fears that, with the unemployment rate down to 4. Sales were down 0. The weakness was widespread with department store sales leading the way, down 1 percent. Industrial production and factory orders offered no respite. IP was flat with auto production down 2 percent and business equipment down 0.
Factory orders were down 0. That makes sense in light of the inventory reports which showed contraction at the wholesale level as well as overall. That might be a potential bright spot for the future but alas the inventory draw was matched by a drop in sales. Rounding out the weak reports was the report on housing starts last Friday. Housing has been one of the few bright spots in this economy but it has been dimming recently. Starts and permits were both down sharply. Single-family starts were down 3.
The apartment building boom that has driven residential investment for the past few years would appear to be over, at least for now. Absorption rates are falling, vacancies are rising and rents have all but stopped rising.
We can see the weakness in our market-based indicators. The yield curve flattened by another 6 basis points and has now given up all the steepening that started last August and accelerated after the election.
Stocks may still hope for tax reform but the bond market has given up and faced the reality that any change in economic policy is probably not going to happen during the recesses federal reserve inflation stock market the oxymoronically named Senate Intelligence Committee. Inflation expectations, taking their cue from the PPI and CPI reports, also fell, down 8 basis points since the last update:.
Rates moved up slightly but then fell right back:.
Further confusing the picture, TIPS yields rose. Inflation expectations fall and real growth expectations rise ever so slightly.
There might be a lesson for the Fed in there somewhere. The move in the yield curve would seem to be all about inflation expectations and again I am left wondering what exactly the Fed thinks it is fighting. Meanwhile, review the binary equation trading systems spreads actually widened since the last update.
Well, if you want to call 3 basis points widening. Risk appetite has not waned even in the face of weak economic data. Gold was down slightly since the last update but as with the dollar index the trend since the beginning of the year is obvious and not supportive of the growth story. Growth is still capped around 2 percent with risks apparently to the gold and forex rate in dubai especially with the Fed intent on heading off non-existent — so far — inflation.
Our market indicators do not point to any imminent problems but they do continue to point to weaker growth than widely expected by economists and stock speculators.
It also shows that anyone hanging their policy hat on rising inflation is likely to be disappointed. When will anti-trust finally become a problem for Jeff Bezos?
Stocks rise but dollar slides after Federal Reserve raises US interest rates - as it happened | Business | The Guardian
Anyone want to bet on why he bought the Washington Post? The Fed is expected to raise rates at least once more this year and start to unwind its bloated balance sheet. Steeper yield curves are associated with higher growth while flat or inverted ones are associated with lower growth.
Correlation and causation are hard to disentangle — is it higher growth that steepens the curve? Or a steeper curve that leads to higher growth?
Time to find out if you ask me. Nothing else has worked. Newsmax, Moneynews, Newsmax Health, and Independent. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc. Slowing Car Production Industrial production and factory orders offered no respite. Market Signals We can see the weakness in our market-based indicators. Inflation expectations, taking their cue from the PPI and CPI reports, also fell, down 8 basis points since the last update: Rates moved up slightly but then fell right back: The Bloomberg Commodity index fell through support.
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