May 5, 2022 Headlines

Markets are giving back some of yesterday’s post-FOMC move, which saw stocks surge 3% higher and front-end Treasury yields fall 13-15 basis points. The dovish market response was mostly attributable to Jerome Powell effectively dismissing a 75 bps rate hike as a possibility at future meetings, which eased some concerns that the Fed had shifted into an even more hawkish position in recent weeks. As one rates strategist noted this morning, the market reaction yesterday was more about positioning than substance from the Fed, which makes reasonable sense given the growth in short positions in recent weeks, particularly in Treasuries. The pace of balance sheet reduction was largely in line with expectations, but a somewhat delayed start (June 1) and no mention of asset sales fueled strong outperformance for Agency MBS relative to Treasuries yesterday afternoon.
While there was considerable focus on the “not actively considering” 75 bps rate hikes comment, the rest of Powell’s comments (and the official statement) shouldn’t be characterized as dovish. He emphasized that there will be no hesitation to move into restrictive policy territory if needed, and he also acknowledged (correctly) that neither high inflation or higher rates to combat inflation are pleasant scenarios for consumers and businesses. Focus now shifts to tomorrow’s jobs report for April.

Jason Haley
Chief Investment Officer

05/02/22S&P Global US Manufacturing PMI59.759.259.7
05/02/22Construction Spending MoM0.80%0.10%0.50%
05/02/22ISM Manufacturing57.655.457.1
05/02/22ISM Prices Paid87.484.687.1
05/02/22ISM New Orders54.153.553.8
05/02/22ISM Employment5550.956.3
05/03/22Factory Orders1.20%2.20%-0.50%0.10%
05/03/22Factory Orders Ex Trans2.50%0.40%1.00%
05/03/22Durable Goods Orders0.80%1.10%0.80%
05/03/22Durables Ex Transportation1.10%1.40%1.10%
05/03/22Cap Goods Orders Nondef Ex Air1.00%1.30%1.00%
05/03/22Cap Goods Ship Nondef Ex Air0.40%0.20%
05/03/22JOLTS Job Openings11200k11549k11266k11344k
05/03/22Wards Total Vehicle Sales14.15m14.29m13.33m
05/04/22MBA Mortgage Applications2.50%-8.30%
05/04/22ADP Employment Change383k247k455k479k
05/04/22Trade Balance-$107.1b-$109.8b-$89.2b-$89.8b
05/04/22S&P Global US Services PMI54.755.654.7
05/04/22S&P Global US Composite PMI55.15655.1
05/04/22ISM Services Index58.557.158.3
05/04/22FOMC Rate Decision (Upper Bound)1.00%1.00%0.50%
05/04/22FOMC Rate Decision (Lower Bound)0.75%0.75%0.25%
05/04/22Interest on Reserve Balances Rate0.90%0.90%0.40%
05/05/22Challenger Job Cuts YoY6.00%-30.10%
05/05/22Nonfarm Productivity-5.30%-7.50%6.60%6.30%
05/05/22Unit Labor Costs10.00%11.60%0.90%1.00%
05/05/22Initial Jobless Claims180k200k180k181k
05/05/22Continuing Claims1400k1384k1408k1403k
05/06/22Two-Month Payroll Net Revision95k
05/06/22Change in Nonfarm Payrolls380k431k
05/06/22Change in Private Payrolls390k426k
05/06/22Change in Manufact. Payrolls35k38k
05/06/22Unemployment Rate3.50%3.60%
05/06/22Average Hourly Earnings MoM0.40%0.40%
05/06/22Average Hourly Earnings YoY5.50%5.60%
05/06/22Average Weekly Hours All Employees34.734.6
05/06/22Labor Force Participation Rate62.50%62.40%
05/06/22Underemployment Rate6.90%
05/06/22Consumer Credit$25.000b$41.820b


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