Daily Market Color

Markets Prepare for January PCE

Treasury yields fall ahead of Friday’s PCE data release. Treasury yields declined today, with the 2-year yield staying flat at 4.70% and the 10-year yield falling ~4bps to 3.88%. The move came despite this morning’s data, which included QoQ PCE and the Chicago Fed National Activity Index, initially pushing rates to session highs before they grinded lower into the close. Tomorrow’s PCE figure will have a larger impact on the direction of rates, with the next FOMC meeting set to occur in three weeks.

PCE inflation expected to show no-signs of a slowdown. Tomorrow’s PCE release will be closely watched, as markets and the Fed try to make sense of inconsistent inflation and labor data from the past few months. Estimates for tomorrow’s release do not look supportive of a dovish pivot in the near-term, which is no surprise given recent Fedspeak and market assessments pointing to continued strong inflation in 2023. 

Day ahead. PCE, personal income, and personal spending figures will lead a busy session at 8:30 AM, with Michigan consumer sentiment to follow at 10 AM.  Fed hawks Philip Jefferson (voter) and Loretta Mester (non-voter) will make public comments at 10:15 AM.

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