INVESTMENT GRADE DEBT ROSE AGAINST ITS HIGH YIELDING COUNTERPARTS in net prices linked to actual trades. Theservice sector carried the economy in May with a solid performance contrary to recent manufacturing and consumer spending reports. The Fed is overall pleased with the economy as it expanded at “a modest pace overall”showingresilience despite the escalation of trade tensions and a tight labor market. The 10-year note further dipped 2.2 basis points. S&P +-0.54%, DOW +0.56, NASDAQ +0.35%.
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THE FEDERAL RESERVE INDICATED A POSSIBLE RATE CUT if trade tensions escalate and begin to hamper the economy. Jerome Powell stressed, “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion.” Delivery of July West Texas Intermediate rose 0.54 percent reversing four straight sessions of declines. Heightened global trade concerns and volatile markets caused crude to tumble as investors fear demand could be impacted. The 10-year note further gained 5.8 basis points. S&P+2.14%,DOW +2.06,NASDAQ+2.65%.
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MANUFACTURING IN MAY EXPANDED AT ITS SLOWEST RATE in over two years slipping to 52.1 from 52.8 from April. The sentiment downturn is linked to recent trade threats made by the White House and indications pointing to a slowing global economy. The sector is also being hindered by responses from countries following increased tariffs from the US. The 10-year note further fell 5.6 basis points. S&P-0.61%, DOW -0.30%, NASDAQ -1.97%.
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SAFE-HAVEN ASSETS SOARED WHILE EQUITIES TUMBLED ON FRIDAY following the White House announcing tariffs on Mexican goods. The 10-year note plummeted 8.2 basis points, shedding 18 basis points this past week slipping to 20-month lows. JPMorgan predicts there will be two interest rate cuts by the end of the year given the new tariff threats. S&P -1.32%, DOW +1.41, NASDAQ -1.51%.
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REVISED GDP DATA REVEALED THE ECONOMY GREW SLOWER THAN EXPECTED in the first quarter of 2019 due to reduced business investment and a decline in corporate profits. Consumer spending overall remained stagnant with one exception, spending on durable goods sank 4.6 percent. Pending home sales fell marking the 16th straight month of annual declines as the 30-year mortgage fixed rate mortgage dipped below 4 percent. The 10-year note dipped 5.5 basis points.S&P+0.21%,DOW+0.17%, NASDAQ+0.27%.
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U.S. STOCKS DECLINED AGAIN WEDNESDAY as trade worries continued and more investors moved into government bonds. The Treasury yield curve has reached its deepest inversion since 2007, with the 3-month yield topping the 10-year by almost 10 basis points. Amidst the yield curve predicting economic downturn, all three major indices fell today. S&P -0.69%, DOW -0.87%, NASDAQ -0.79%.
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INVESTMENT GRADE BONDS ROSE AGAINST HIGH YIELDING DEBT in net prices linked to actual trades. The 10-year note lost 6.4 basis points settling at its lowest since October 2017. Equities settled lower and gave up gains following the threat of a trade war escalation with China. S&P -0.85%, DOW-0.93%, NASDAQ -0.39%.
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RISK-OFF SENTIMENT PREVAILED as investment grade debt rose against junk bonds in net prices linked to actual trades. Jobless claims fell to a seasonally adjusted 211,000 claims surpassing expectations; managers continue to struggle with employee retention and sourcing skilled labor. In other economic news, new home sales declined across the country in all regions except the Northeast sinking 6.9 percent. The 10-year note plunged 7 basis points settling near 18-month lows. S&P -1.19%,DOW -1.11%, NASDAQ -1.58%.
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U.S. STOCKS DECLINED WEDNESDAY after the Federal Reserve indicated it will hold off on an interest rate change. Voting member of the Fed James Bullard stated, “Rates are at a good place in the U.S. right now, if anything we are a little restrictive I would say”. The Fed was in agreement that the current policy can stay, but was split on whether it would change if the economy continues on its expected path. Combined with persisting tariff tensions, all three major indices fell today. S&P -0.28%, DOW -0.39%, NASDAQ -0.45%.
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BOSTON FED RESERVE CHAIRMAN ERIC ROSENGREN stated he sees “no clarion call” to increase interest rates any time soon emphasizing “the Fed can afford to wait and see.” Unemployment is hovering at 50-year lows, In April the jobless rate was 3.6 percent. Treasury yields ticked higher after a report the US eased trade restrictions on Chinese telecom giant Huawei Technologies. The 10-year note gained 1.2 basis points. S&P +0.84%, DOW +0.72%, NASDAQ +1.05%.
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