Improved sentiment in global risk markets overnight is contributing to higher Treasury yields this morning.  Major overseas equity markets are higher on the day (Nikkei +0.9%, Hang Seng +2.2%, Euro Stoxx +0.4%), and S&P 500 futures are currently up 11 points. German business sentiment (IFO survey) rose in August for the first time in 9 months, and Chinese officials warned that fixed asset investment may weaken further in the coming months (already at record lows). The general market perception of Fed Chair Powell’s Jackson Hole speech was dovish, but Powell largely stuck to his message of the last several months. He noted strength in the U.S. economy and inflation that is close to the Fed’s target, and as such, gradual (i.e., quarterly) rate hikes remain appropriate. The dovish market reaction was likely attributable to a senior staff paper released by the Fed last Thursday, which effectively suggested that more aggressive tightening may be warranted given current economic conditions. This analysis was based on model estimates of natural policy and unemployment rates, which Powell has downplayed on occasion in the past. The fact that Powell did not echo the hawkish tone of the staff paper in his Friday speech likely explains the market reaction, but his tone was not surprising to the closest observers of Fed policy and leaders. The release of July PCE inflation data on Thursday headlines this week’s economic calendar.

Jason Haley
Managing Director, Investment Management Group

Date TimeEventSurveyActualPriorRevised
08/27/2018Chicago Fed Nat Activity Index0.450.130.430.48
08/27/2018Dallas Fed Manf. Activity3032.3
08/28/2018Advance Goods Trade Balance-$69.0b-$68.3b-$67.9b
08/28/2018Wholesale Inventories MoM0.20%0.10%
08/28/2018Retail Inventories MoM0.00%0.10%
08/28/2018S&P CoreLogic CS 20-City MoM SA0.20%0.20%
08/28/2018S&P CoreLogic CS 20-City YoY NSA6.40%6.51%
08/28/2018S&P CoreLogic CS 20-City NSA Index211.94
08/28/2018S&P CoreLogic CS US HPI NSA Index202.95
08/28/2018S&P CoreLogic CS US HPI YoY NSA6.38%
08/28/2018Richmond Fed Manufact. Index1720
08/28/2018Conf. Board Consumer Confidence126.6127.4
08/28/2018Conf. Board Present Situation165.9
08/28/2018Conf. Board Expectations101.7
08/29/2018MBA Mortgage Applications4.20%
08/29/2018GDP Annualized QoQ4.00%4.10%
08/29/2018Personal Consumption3.90%4.00%
08/29/2018GDP Price Index3.00%3.00%
08/29/2018Core PCE QoQ2.00%2.00%
08/29/2018Pending Home Sales MoM0.50%0.90%
08/29/2018Pending Home Sales NSA YoY-2.50%-4.00%
08/30/2018PCE Core YoY2.00%1.90%
08/30/2018Personal Income0.40%0.40%
08/30/2018Personal Spending0.40%0.40%
08/30/2018Real Personal Spending0.20%0.30%
08/30/2018PCE Deflator MoM0.10%0.10%
08/30/2018PCE Deflator YoY2.30%2.20%
08/30/2018PCE Core MoM0.20%0.10%
08/30/2018Initial Jobless Claims213k210k
08/30/2018Continuing Claims1730k1727k
08/30/2018Bloomberg Consumer Comfort58.6
08/31/2018Chicago Purchasing Manager6365.5
08/31/2018U. of Mich. Sentiment95.595.3
08/31/2018U. of Mich. Current Conditions107.8
08/31/2018U. of Mich. Expectations87.3
08/31/2018U. of Mich. 1 Yr Inflation2.90%
08/31/2018U. of Mich. 5-10 Yr Inflation2.50%