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A Quiet Day

Will today’s data confirm the increasing sense of optimism that the Federal Reserve is approaching the end of its interest rate hikes?  Yields on the two-year Treasury, or the instrument most sensitive to monetary policy, declined to 4.85%, down from last Friday’s multiyear peak of 5.10%.

Swaps tied to Fed meeting dates prices in less than a 50% chance of another quarter point rate increase this year.  As recently as Tuesday—before the release of the JOLTS jobs data—a hike was given a probability of about 75%.

Second quarter GDP rose at a more moderate pace than expected and survey of private sector job creation indicated that companies added the fewest jobs in five months.

The Federal Reserve has forcefully indicated that it will rely upon the economic statistics for all monetary policy decisions.  Against this backdrop, sentiment may radically change on any data point, such has been the case during the last 48 hours.

Today the PCE or the Federal Reserve’s preferred measure of inflation is released.  How will the data be interpreted.

What will happen today as most markets were relatively quiet yesterday.

Last night the foreign markets were mixed.   London was up 0.01%, Paris down 0.14% and Frankfurt up 0.59%.  China was down 0.55%, Japan up 0.88% and Hang Seng down 0.55%

Futures are bifurcated as Dow futures are up 0.25% and NASDAQ futures down 0.25%.   The 10-year is up 4/32 to yield 4.11%.

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Ken Engelke

Chief Economic Strategist Managing Director

The views expressed herein are those of Kent Engelke and do not necessarily reflect those of Capitol Securities Management. Any opinions expressed are statements of judgment on this date and are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated or projected. Any future dividends, interest, yields and event dates listed may be subject to change. An investor cannot invest in an index, and its returns are not indicative of the performance of any specific investment. Past performance is not indicative of future results. This material is being provided for informational purposes only. Any information should not be deemed a recommendation to buy, hold or sell any security. Certain information has been obtained from third-party sources we consider reliable, but we do not guarantee that such information is accurate or complete. This report is not a complete description of the securities, markets, or developments referred to in this material and does not include all available data necessary for making an investment decision. Prior to making an investment decision, please consult with your financial advisor about your individual situation. Investing involves risk and you may incur a profit or loss regardless of strategy selected. There is no guarantee that the statements, opinions or forecasts provided herein will prove to be correct. If you would like to unsubscribe from this e-mail distribution, please reply to this e-mail and indicate that you wish to unsubscribe in your response.