Warming up along with the weather, the Philadelphia Fed Index jumps to a 7-month high of 16.6 from 9.0 previously. New Orders rose to 14.8 from 5.7, Shipments to 22.7 from 5.7. Delivery Times dive to -14.3 from -2.7, meaning times got far shorter - typically a sign of economic weakness, but this time maybe just melting snow?
One weak sign from the report: The six-month outlook slumps to 26.6 from 35.4.
The Bloomberg Consumer Comfort Index rises to -29.1 from -31.9, reflecting a board recovery among most income groups. The weekly gauge had been on a downtrend along with temperatures during the mid-to-late winter.
Reports from the 12 Federal Reserve Districts suggest economic activity increased in most regions of the U.S. since the previous report, with consumer spending increasing as weather conditions improved, according to the latest Beige Book.
10 of the 12 districts saw improvement - mostly to "modest to moderate" - but activity declined in the Cleveland and St. Louis regions.
Manufacturing improved in most districts, reports on residential housing markets varied.
Stocks are little changed; 10-year Treasury yield +1.5 bps at 2.641%.
Overshooting can be costly, says Janet Yellen - now in Q&A following her speech - responding to a question about tightening policy. I hope it's clear, she says, that as the recovery proceeds, the Fed will need to tighten.
On a question about Europe, Yellen says the economy there is being held back by its banking sector. The lesson for U.S. banks: Further strengthening - i.e., more stringent capital requirements.
Previous: In speech, Yellen says Fed committed to accommodation as long as needed.
Equities and Treasury prices are pretty much where they stood prior to Yellen taking the podium in NY.
The three big questions for the FOMC, says Janet Yellen are 1) Is there still significant slack in the labor market 2) Is inflation moving back toward 2% 3) What factors may push the recovery off track?
As for labor, the Fed's baseline projection is more than another two years until full employment (defined as headline UE of 5.2-5.6%) is reached. She notes wage pressures are a good signal of a tightening labor market and signs of acceleration are difficult to find.
Addressing the FOMC's dropping of guidance being steered by the headline UE rate, Yellen says it may have changed, but the goal of guidance - that the FOMC will maintain ZIRP for some time - hasn't. "Decisions about liftoff (in the Fed Funds rate) should not be based on any one indicator, but that it will take into account a wide range of information on the labor market, inflation, and financial developments."
At 1.7% at the end of Q1, the U.S. junk bond default rate is off from 2.2% at the end of 2013, and at the lowest level since February 2008, according to Moody's. With the market yielding an average of just 5.2% (prior to 2012 it had never been below 6.5%), the default rate better stay low.
Moody's sees the default rate rising to 2.4% by year's end and 2.7% one year from now - both still well below the 20-year average of 4.5%.
It's not necessarily a booming economy, but instead welcoming debt markets which allow low-rated issuers to refinance at extended maturities and lower rates.