Vital Statistics:
Stocks are lower this morning as the US and China accuse each other of undermining trade negotiations. Bonds and MBS are down.
Trump is doubling tariffs on steel and aluminum, which is also weighing on sentiment this morning.
The upcoming week will be dominated by the jobs report on Friday. We will also get ISM data and productivity numbers. It doesn’t look like we have a lot of Fed speakers on the calendar.
Consumer sentiment was unchanged in May according to the University of Michigan Consumer Sentiment Survey. The pause in the trade wars was probably the biggest driver, although personal finances did suffer somewhat. Consumer sentiment stopped falling, however it hasn’t started to improve yet.
Year-ahead inflation expectations rose to 6.6% from 6.5%, however long-term inflation expectations fell from 4.4% to 4.2%. It appears that tariff news is still the big driver of sentiment, and the budget that is working its way through Congress is not.
Fed Governor Christopher Waller said he supported “good news” rate cuts later this year, provided that any inflation bump caused by tariffs was short-lived. He said that he didn’t see a recession on the horizon, and that any rate cuts will be motivated by declining inflation, not economic weakness.
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