Hot Jobs, CPI, PPI Data Send Yields Up, “Higher for Longer” is Back (For Now)
This week’s CPI release for March indicated 0.4% monthly increases in core and headline inflation. Markets were expecting no more than 0.3%. The March data seemed to contradict hopes that the hot Dec-Feb CPI was due to year end seasonal factors and that the rocky path down to 2% annual inflation would resume. The inflation report came on the heels of last week’s stronger than expected jobs report (303,000 vs 212,000 expected). Fed rate cut expectations are now hugely diminished. What was once 5-6 cuts starting in March is now about 2 cuts starting in July or September (June is now off the table). The narratives are shifting again: Higher for Longer, Going Sideways, Re-Acceleration Danger. The 10-year Treasury spiked from 4.34% (just before CPI) to 4.60% (yesterday), before dropping to 4.50% today. Today’s rally wasn’t good news either as its being stoked by a “flight to quality” on the year’s biggest sell-off in stocks (Dow down over 500). The sell off is being stoked by inflation fears, geopolitical concerns (Mideast conflict widening on Israel-Iran tensions), oil price spikes and JP Morgan results and guidance. Stay tuned…
By David R. Pascale, Jr., Senior Vice President at George Smith Partners.