The selloff in the ten-year Treasury is continuing as yields are now at the highest level since November. The markets conviction of three quarter point reductions is quickly dissipating, with markets favoring just two reductions.
Tomorrow March’s CPI will be released. While analysts expect some easing of inflation pressures, the core rate—which excludes food and energy—is expected to be up 3.7% from a year ago, significantly above the Fed’s 2% target.
As noted many times, the markets’ advance from its mid-October lows was predicated on the Fed lowering interest rates by 150 to 175 bps IN 2024. The narrative has now changed to earnings as the predominant support for stock prices.
Earning seasons commences later this week with the release of several bulge bracket financials. Will these results support the new narrative?
Equites were relatively quiet yesterday ahead of the upcoming inflation data and earnings season.
Last night the foreign markets were up. London was up 0.07%, Paris down 0.53% and Frankfurt down 0.785. China was up 0.05%, Japan up 1.08% and Hang Seng up 0.57%. Futures are flat. Former St. Louis Fed President James Bullard stated three rate reductions is still the “base case” for 2024. Oil is at a five-month high on simmering Middle East tensions and supply concerns. Israel stated progress has been made in cease fire negotiations but Hamas denied the claims. The 10-year is up 8/32 to yield 4.39%.
Kent Engelke
Chief Economic Strategist Managing Director
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