Yields Up, Stocks Down

In this buzz: Stocks suffered; Treasuries fell and yields rose; Durable goods report and ISM manufacturing and consumer confidence later this week; and more…

Stocks suffered…
… their worst week of 2023 following the Presidents’ Day holiday as one of the Fed’s key inflation figures,
… the personal consumption expenditures (PCE) came in higher than expected. This was fodder for investors, already concerned about the duration and magnitude of the Fed’s rate hike campaign to shed risk assets.

Treasuries also fell and yields rose; the UST 2-year yield reached its highest level since the great financial crisis.
– The 2-year touched 4.83% while the 10-year treasury note was up slightly at 3.953%.
– In February 2-year yields have risen more than 70 basis points, while the 10-year has risen about 50 bps.

Data for this week include…
– durable goods on Monday and
– ISM manufacturing and consumer confidence are released later in the week.

Despite concerns about inflation, the yield curve remains inverted, with 2-year yield above 10 and 30 -year treasury rates. 💡This inversion is historically seen as a harbinger of a recession. However, the direction of inflation and the economy are hotly contested issues in this environment with some participants believing the Fed has won its battle with inflation while others contents that higher rates, prices and wages are here to stay.

🧠 Box:
Personal Consumption Expenditures Price Index A measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services.

The PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior. It’s a major indicator of inflation in the U.S. economy.