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Traders' Espresso: AM Edition (02/28/18)

Summary

U.S. equities reversed course, snapping a two day win streak, following Jerome Powell's testimony to Congress, interpreted by many as more hawkish.

The impact of the Fed chief's comments spread globally; sending Asian and European indices broadly lower.  U.S. futures are pointing to a slightly positive open.

Investors await more economic data today to judge U.S. economic health and possible overheating.

Energy commodities, copper and platinum down.  Gold, silver, palladium and softs are higher.

Global yields broadly lower; U.S. Dollar index higher by 0.2%.

U.S. equities fell hard on Tuesday, mostly in reaction to Jerome Powell's testimony to the House Financial Services committee.  Mr. Powell took a more hawkish tone than was portrayed in the text of his prepared testimony released prior to his appearance before the House.  The Fed chief noted that quite a bit has changed since the December/January time-frame; and that he believes that members of the FOMC should take another, fresh look at the tightening path that the  Fed is currently on.  It seems that markets are now shifting to the view that 2018 will hold four rate hikes, more hawkish than the prior consensus of three.  Asian and European markets followed their U.S. counterparts, pricing this more hawkish view into equities.  Mr. Powell will appear again on Thursday before the Senate.

Investors will be greeted by more economic data today and tomorrow, as they search for more clues as to what the FOMC may be looking at as they evaluate the appropriateness of their current rate path.  GDP and inflation measures came in at or slightly below target this morning:

  • Gross Domestic Product Price Index came in at 2.3% against consensus of 2.4%; Personal Consumption Expenditures (PCE) came in at 2.7% against consensus of 2.8%
  • Annualized Gross Domestic Product came in as expected at 2.5%; Core PCE came in as expected at 1.9%.

On tap later this morning, investors await the Chicago Purchasing Managers' Index, as well as MoM and YoY data on pending home sales.

U.S. futures are slightly higher this morning, buoyed by the mixed inflation numbers that were released at 08:30AM ET.

Trading will likely be slower and lower volume today, in anticipation of a slew of economic data, and Jerome Powell's appearance before the Senate, on Thursday.  On tap for Thursday:

  • More PCE data, Personal Spending, Personal Income, Initial and Continuing Jobless Claims at 08:30AM ET
  • Markit Manufacturing PMI at 09:45AM ET
  • MoM Construction Spending, ISM Manufacturing PMI and ISM Prices Paid at 10:00AM ET.

For expanded discussion, including charting and technical analysis, click here for the video edition of Traders' Espresso.