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Stocks Rise, Yield Curve Flattens Further to Finish Volatile Week

 

Equity Markets End Week on High Note, USTs Rally

After a wild week, all three major equity indices are poised to finish today’s session in the black, up from 1.4% to 1.7%.  A volatile quarter that featured strong gains in January, big swings in February and a tech route in March comes to a close today.  The tech-heavy Nasdaq fared the worst on the week, impacted by the news of the US government prohibiting domestic tech investment from China.  Treasurys rallied for the third time in the past four days, as yields/swap rates declined 1-5 bps across the curve in a bull flattening pattern.  The 10-year note yield is trending to finish the holiday-shortened trading week near 2.74%, more than 10bps lower than where it opened on Monday.  Investors making bets on a steepening yield curve continue to get punished, as the 2s10s spread narrowed to its lowest levels of the decade today at 47bps.  In commodities, WTI crude futures closed 1% higher on the session, finishing the week near $65/barrel.

 

 

Increases in Spending Lag Income

The Commerce Department’s report on personal income and consumer spending for February led a today’s economic data reporting.  Detailed in the report, personal income rose a solid 0.4% last month (matching estimates), while consumer spending, which accounts for more than two-thirds of US economic activity, grew at a tepid 0.2%.  During the same time period, Americans’ personal saving rate increased 0.2% to 3.4% — the highest since August 2017.  Inflation data in the report showed consumer prices increasing at a steady clip as the PCE index, the Fed’s preferred measure of inflation, increased 0.4% in February, yielding an annualized one-year high of 1.8%.  The core PCE index managed a 0.2% rise MoM and 1.6% YoY.

 

 

Jobless Claims at 45-Year Low

As per the weekly report from the Department of Labor, the number people filing for unemployment dropped unexpectedly last week to the lowest level since 1973.  The number of claims fell to a seasonally adjusted 215,000 (-12,000 from prior week), 15,000 fewer than estimates.  Initial weekly claims have now held below the 300,000 threshold associated with a healthy labor market for nearly three straight years.  Also detailed in the report, the number of continuing claims rose by 43,000 to 1.871 million for the week ended March 17th.  Looking ahead to next week, the Labor Department’s comprehensive monthly employment report will highlight key economic data due to be released, where median forecasts point towards 187,000 additional nonfarm payrolls and a contraction in the unemployment rate to 4.0% for March. 

 

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