Equites were initially spooked by data indicating that factory activity contracted for the first time since 2022 Moreover and perhaps more frighting, a measure of costs for materials and other inputs rose for the second straight month with the gauge increasing the highest level since June 2022.
The JOLTS Job Openings were lower than anticipated with the fewest number of openings since 2021. Last month’s data, however, was revised significantly higher. The ration of job openings to unemployed workers—a key gauge of labor market tightness for the Fed—fell to 1.32 in March from 1.36 in the prior month.
This key metric remains above the ratio of 1.2 that prevailed pre-pandemic but has declined notably from the 2.0 peak in March 2022.
Markets turned around following FRB Chair Powell’s statement that “a rate hike is unlikely to be the Fed’s next move” making the outcome a lot less hawkish than many were expecting.
The Fed also outlined the plans to slow the pace at which the central bank will shrink its portfolio. The Fed will cut the cap on runoff for Treasuries to $25 billion a month from $60 billion beginning in June, “in a bid to reduce the risk of financial market turbulence that struck during previous round of balance sheet trimming in 2019” according to the Committee.
The more aggressive ending of QT is the direct result of liquidity issues amplified by the incessant demand of monies from the government.
As indicated above, the statement and post meeting press conference were more dovish than expected, perhaps suggesting the markets are now content with the view of “higher for longer.”
Treasuries rallied across the spectrum and equities, after some late day volatility, closed bifurcated as the Dow ended higher by 0.0% and the NASDAQ off 0.30%. Swaps are now suggesting that a November rate cut “is again back in play.”
What will happen today? AAPL results are released at the market’s close.
Last night the foreign markets were mixed. London was up 0.41%, Paris down 0.66% and Frankfurt up 0.12%. China was down 0.26%, Japan down 0.10% and Hang Seng up 2.50%.
Dow and NASDAQ futures are higher by 040% and 0.80%, respectively on a more dovish than expected Fed. The 10-year is up 7/32 to yield 4.61%.
