Vital Statistics:
Stocks are lower this morning on the escalating trade war. Bonds and MBS are down.
We had another benign inflation report, with the Producer Price Index flat on a month-over-month basis. The Street was looking for a 0.3% increase in the index, so this was a sizeable pleasant surprise. On a year-over-year basis, the PPI rose 3.2%.
If you strip out food and energy, the index fell 0.1% MOM and rose 3.4% on a YOY basis. In theory, this should be good for the bond market, however trade issues are overshadowing the good report.
It is getting hard to keep track of where we are on tariffs – what has been threatened, what has been implemented, what has been revoked, etc. Tariff threats are sucking up all of the oxygen right now, and that is pushing stocks lower. Theoretically that should be good for bonds, but tariffs reduce demand for Treasuries. This is because most countries run trade surpluses with the US, so instead of buying US goods and services countries buy Treasuries instead.
Initial Jobless Claims came in at 220k, which has been the typical level for years. If there is this army of recently-terminated government workers out there, the initial jobless claims aren’t reflecting it.
Donald Trump looks set to nominate Michelle Bowman as the country’s top banking regulator. She is going to replace Michael Barr, and will probably pursue a more deregulatory approach to banking regulation.
