Daily Market Color

Market Selloff Resumes After Fed Comments  

More Fed Hawkishness Sees Rates Rise. Swap rates and Treasury yields rose today after Fed officials continued to warn investors about inevitable future rate hike pain. Cleveland Fed President Loretta Mester said that rates must continue to rise, adding that “we’re still not even in restricted territory on the funds rate.” US equities felt the pain of the aggressive Fed and expectations for higher rates, with tech-heavy NASDAQ declining nearly 3% on the day. US Treasurys also took losses, the 10-year yield increasing to 3.78%, while the 2-year rose to 4.19%.

Quarterly Personal Consumption and Initial Jobless Claims data offer support for continued Fed hawkishness. PCE, the Fed’s preferred measure of inflation, increased 2.0% QoQ, exceeding analyst expectations of 1.5%. Core PCE, which excludes food and energy, increased 4.7% QoQ, also exceeding the 4.4% consensus estimate. Initial jobless claims during the week that ended 09/24 declined to a 5-month low of 193,000 last week, which was a big surprise for analysts who expected a slight increase amid Fed hikes. Viewed alone, these results imply persistent consumer strength and provide cover for the Fed to continue hiking rates. In conjunction with other data points, however, economic uncertainty remains the dominant theme.

Day ahead. Monthly personal spending and income data is set for release at 8:30 AM ET, while numerous Fed members will make public comments.

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