Inflation Beat Fuels Higher Rates

PCE beat spurs bond sell-off. Swap rates and Treasury yields rose across a flattening curve today after higher-than-expected PCE data offered the Fed more room to hike rates. Quarter-over-quarter PCE (4.9%) was the highest since March 2022 (5.6%) and pushed yields immediately higher by ~9bps. The 2-year yield closed at 4.08%, 13bps higher on the day, while the 10-year yield finished at 3.52%.

Tech companies post strong earnings. Equities rallied significantly today after positive earnings results, the NASDAQ Composite rising nearly 2.50% while the S&P 500 increased just under 2%. Tech companies such as Meta Platforms, Amazon, and Intel saw their shares boosted. Meta saw the largest gain of the three, rising ~14% to a year-plus long high.

Day ahead. Personal income, personal spending, and PCE data (8:30 AM) will be the highlights, all of which are expected to come in below last month’s levels, excluding core PCE. Chicago PMI and Michigan consumer sentiment figures will be released later in the morning.