Daily Market Color

Risk On Sentiment Ahead of April FOMC Minutes

US stocks are trading higher while Treasuries are selling off across the curve ahead of this afternoon’s release of the April FOMC minutes.  A recent string of stronger-than-expected economic data and hawkish comments from Fed officials have caused investors to reconsider their outlook for near term future Fed policy.  Following Friday’s upbeat retail sales report and yesterday’s jump in CPI, Dallas Fed President Kaplan said he may advocate for a rate hike in June or July, and two other regional Fed presidents said they expect 2-3 rate increases this year.  Further fueling the reassessment of monetary policy expectations, Jan Hatzius, chief economist at Goldman Sachs, said that markets are currently mispricing the Fed.  Hatzius predicts the Fed will hike rates at least twice this year and thinks the flattest yield curve since 2007 doesn’t reflect that.  Market pundits will be analyzing the minutes for additional visibility into the possibility of a summer rate hike. 

There are no significant US data releases today, so markets will continue to brace for the FOMC minutes and focus on corporate earnings and issuance.  Disappointing quarterly results from Target renewed pressure on retail stocks, but outperformance from the financial sector helped stabilize the broader market.

All three major US stock indexes are currently up 0.50%-0.75% while Treasury yields and swap rates are 2 to 5 bps higher across all major maturities.  Both WTI and Brent crude continued their recent advances, trading up 0.85% and 0.50%, respectively.

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