There is intense volatility within a narrow range in the bond market. Last week, long dated yields were around the highest level since mid-February. Today they are around the lowest since early March. Additionally, the market is now discounting 76 bps of easing. Last week it was less than 45 bps.
Are tariffs inflationary? Or are they recessionary? Will stagflation emerge? Perhaps even a more simplistic question, what will be the tariff policy? The narrative is at a crescendo discussing the massive uncertainty that businesses are confronting.
Bloomberg wrote yesterday “virtually all aspect of President Trump’s April 2 global tariffs announcement remains unclear.” Will the announcement at 4:00 PM offer any more clarity?
Commenting on yesterday’s data, the ISM Manufacturing Survey declined in March for the first time this year and prices accelerated sharply for a second month. The decline was slightly more than expected.
The group’s price measure increased to the highest since June 2022 and was moderately higher than forecasted. Over the past two months the pricing gauge has increased the most during a comparable period in four years.
The JOLTS Jobs data largely met expectations, suggesting a solid labor market.
The upcoming ISM Services Survey and the BLS Labor Report are the next two hard data points that could suggest the momentum/direction of the economy. A pivotal question at hand will inflation or inflationary expectations become a major narrative or driving force?
Equites were volatile yesterday, erasing most of their gains after the White House said the tariffs will take immediate effect after they are announced.
As stated above, Treasury yields fell across the curve as the ISM data was interpreted more recessionary rather than inflationary. The curve flattened nominally.
Last night the foreign markets were down. London was down 0.78%, Paris down 0.68% and Frankfurt down 1.32% . China was up 0.05%, Japan up 0.28% and Hang Seng down 0.02%.
Dow and NASDAQ futures are down 0.30% and 0.80%, respectively ahead of the much-anticipated tariff announcement. Will there be clarity? Has the market already discounted most possible outcomes? The 10-year is up 6/32 to yield 4.15%.
