Morning Minutes

Mixed Markets Weigh Dovish Fed and Rising Treasury Yields

True TacticalTM - engineer analyzing document with statistics
True TacticalTM - engineer analyzing document with statistics



The Fed staked out the middle ground yesterday sending a cautiously optimistic assessment of economic conditions (some sectors still struggling but room for improvement as vaccines roll out), which remaining dovish on monetary policy (current support programs to continue until US is back closer to full employment and inflation is back up above 2.00%.)

Highlights of FOMC member forecasts from yesterday include:

GDP Growth     2021 increased to 6.5% from 4.2%, 2022 forecast only increased to 3.3% from 3.2%.

Unemployment  2021 improved to 4.5% from 5.0%, 2022 improved to 3.9% from 4.2%.

Inflation            2021 increased to 2.4% from 1.8%.inflation, then ease back to 2.0% next year.

Fed Funds Rate Out of 18 FOMC members surveyed, all 18 expect no increases in 2021, 14 members expect no increases in 2022 and 11 members expect no increases in 2023.

With the Fed remaining accommodative and willing to let inflation rise a bit while expecting economic conditions to improve, US treasury yields continued to climb overnight with the 10-year treasury note yield approaching 1.75% and the 30-year yield approaching 2.50%. Overseas stock markets have been building on the strong finish to yesterday’s North American trading day with the Dax up 0.6%, the Nikkei up 1.0% and the Hang Seng up 1.3% The US Dollar is flat to slightly higher against other currencies today, most notably a 0.3% gain against the Euro.

Upward momentum in US index futures has faded this morning with Dow Futures flat, S&P futures down 0.7% and NASDAQ Futures down 1.7%. The Bank of England maintained its current benchmark interest rate and asset purchase target at today’s meeting. Central bank meetings continue with the Bank of Japan meeting tonight and the People’s Bank of China meeting at the start of next week.  

Other economic news today has been mixed, US weekly initial jobless claims were worse than expected (770K vs street 700K), but the Philadelphia Fed Manufacturing Survey was a lot better than expected (51.8 vs street 23.0). In Canada, new  house prices were up 7.0% over year in February, accelerating from January’s 5.4% growth rate. Its a light morning for earnings news, but FedEx and Nike report after the close today.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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