Daily Market Color

Rates Rise Despite February’s Decline in Consumer Spending

S&P 500 closes at a record high
Market sentiment remained positive throughout the day, pushing US equity indices higher – the DJIA rose 1.4%, while the S&P 500 rose 1.7% to close at a record high.  Treasury yields and swap rates rose 1-4 bps across the curve – the 10-year UST yield closed 4 bps higher at 1.67%.
Consumer spending fell 1% in February, largest drop in 10 months
Personal income also fell 7.1% after rising 10.1% in January after harsh weather conditions rook a toll on Texas and other Southern states.  The core PCE index rose 0.1% M/M after increasing 0.2% the month before.  Y/Y core PCE, the Fed’s preferred inflation gauge, fell to 1.4% from 1.5%,  remaining below the 2% threshold.  The reading is consistent with Fed Chair Jerome Powell’s comments from his Congressional testimony earlier this week, stating he expects inflation in 2021 to be “neither particularly large nor persistent.”
US goods deficit widened by +2.5% in February
In February, the advance goods trade balance widened to $86.7 billion from $84.6 billion the month prior after imports and exports declined 1.4% and 3.8%, respectively.
Oil prices rise following Suez Canal shutdown
A large container ship blocked the Suez Canal on Wednesday, leaving over 30 oil tankers waiting in line to pass through.  Despite the low seasonal demand, the delay in freeing the ship pushed oil prices higher – WTI crude rose 3.8% on the day.
EUR/USD turns lower after earlier bounce
After a false breakout earlier this month, the EUR/USD has reversed course this week back towards election time lows (currently ~ 1.1794).  The disparity in US vs European pandemic outcomes in the near term continues to weigh on the euro.

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