Data and Fed Remain in Focus in Quiet Start to Payrolls Week

US stocks are opening the week little changed while Treasury yields are rallying marginally as markets digest the latest batch of domestic economic data.  Data released on Friday showed the US economy slowed less than previously estimated in the fourth quarter, expanding 1.4%, up from the prior estimate of 1%.  The revised GDP print is still below the 2% pace in the third quarter, but stronger consumer spending helped soften the blow.  The strength of the dollar continued to weigh on U.S. corporate profits however, which fell 5.1% in all of 2015, the most since 2008. 

Data released today was a mixed bag at best.  The Commerce Department’s consumer spending report showed household expenditures only rose 0.1% in February, while January’s 0.5% gain was downwardly revised to 0.1%.  A separate report showed inflation moderated last month, with the PCE price index falling 0.1%.  In the 12 months through February, the PCE increased 1.0% after rising at a 1.2% annualized pace through January.  Core PCE, which strips out the volatile food and energy components, gained 0.1%, keeping the 12 month growth rate at 1.7%, below the Fed’s 2% target.  There was plenty of hawkish talk from Fed policymakers last week, but today’s data did little to boost speculation that a rate hike is imminent when the FOMC meets in April.
 
Today trading volumes are light, with many markets around the world still closed for Easter, but activity should pick up in the coming days with a speech from Yellen on tap for tomorrow and March payrolls data due out on Friday.  All three major US stock indexes are up a fraction of 1%, while Treasury yields and swap rates are 1-3 bps lower across the curve.