Yields inch lower as markets digest yesterday’s Fed meeting. Treasury yields fell today as markets continued to process yesterday’s FOMC meeting and Fed Chair Warsh’s press conference. The 2-year yield closed 3 bps lower at 4.25% and the 10-year yield closed less than 1bp lower at 4.67%. Meanwhile, equities rallied on renewed optimism for AI stocks, with the NASDAQ closing 2.78% higher and the S&P 500 1.66% higher. Microsoft Corp. jumped nearly 16%, while Sandisk Corp. and CoreWeave Inc. each soared over 20%.
Headline PCE sees first monthly decline in six years. The Fed’s favored inflation indicator, PCE, was released today, with the headline print coming in line with expectations at 3.7% YoY, down from May’s 4.1%. On a monthly basis, headline PCE decreased 0.1%, cooler than May’s 0.5% jump and the lowest monthly reading since April 2020. Core PCE, which excludes volatile food and energy, rose 3.3% YoY, in line with expectations and slightly below May’s 3.4%. Energy and gas prices fell 9.2% last month, the largest decline since 2022. However, oil prices have since climbed again as tensions with Iran re-escalate, fueling concerns that the reprieve may not last.
US GDP growth stalls despite strong consumer spending. Inflation adjusted GDP grew 1.5% YoY in the second quarter, below expectations of 2.0% and the prior quarter’s 2.1%. Personal consumption jumped 3.2% on an annualized basis, well above forecasts of 2.3% and Q1’s 0.5% rise. Business spending, driven largely by AI investment, also remained robust, though overall economic growth moderated. Today’s figures emphasize remarkably strong consumer demand despite price pressures stemming from the war in Iran. Following yesterday’s FOMC meeting, Fed Chair Warsh noted the economy’s “impressive” resilience, while labeling business investment as the “most striking” component.
