Yields rise as markets shift risk-on. Treasury yields climbed today as market sentiment turned risk-on, with equities rallying off the back of strong earnings outlooks from Nvidia Corp. and other technology firms. Yields closed 2-4 bps higher across the curve, with the 2-year yield at 4.23% and the 10-year yield at 4.68%. Meanwhile, the S&P 500 and NASDAQ closed 0.72% and 1.57% higher, respectively, with gains led by CrowdStrike Holdings Inc., which also posted a strong forecast yesterday.
US merchandise-trade deficit grows. The US advanced goods trade deficit widened to $118.8 billion in July, a 17.2% MoM increase and the largest deficit in a year. The widening was driven by a surge in merchandise imports, up 3.7%, as shipments of capital goods such as computers and semiconductors reached their highest level since 1993. US goods exports fell 2.9% over the same period. Industrial supplies, including crude oil and petroleum, saw both imports and exports decline, as the Iran conflict has caused trade figures to fluctuate in recent months. Kathy Bostjancic, chief economist at Nationwide, said, “While the wider than expected trade deficit will weigh on Q3 GDP growth, it reflects the strong demand for AI-products, not US economic weakness.”
Fed officials react cautiously to PCE data. Boston Fed President Susan Collins spoke today, continuing her data driven approach with inflation remaining top of mind. Collins said, “I am open to supporting an increase if I see conditions as not providing that evidence of continued disinflation that I’m looking for.” Her comments come the day after July PCE data came in slightly above expectations, though Collins noted that a narrower gauge, which excludes prices that cannot be directly measured, was “more promising.” Kansas City Fed President Jeffrey Schmid echoed a similarly cautious approach, saying that “we need a little more information,” but referenced inflation as “still stubborn and it’s still sticky.”