1. Moving the Markets

It was a choppy session with macro data serving another notice that economic conditions are weakening, a theme I have been pounding on for quite some time. Today, things started with disappointing U.S productivity, the key to a high living standard, which declined at an annual pace of 0.6% for the 1^st quarter 2017 (far worse than the expected 0.1% decline).

That was followed by another hard data miss, namely factory orders that rose 0.2%, which was half of the expected gain of 0.4%. The core orders (without transportation) looked worse, as they stumbled 0.3% the biggest drop since February 2016.

The third try turned out to be a charm as Obamacare was successfully repealed but faces serious senate bickering, which may lead to a significant rewrite of the legislation.

Equities were muted and danced around the unchanged line all day with nothing to show for. The loser of the day award goes to Oil, which was spanked at the tune of -4.87% closing below $46/barrel.

With June rate hike odds still hovering at 90%, it came as no surprise that Treasury yields rose with the 10-year adding 3 basis points to 2.36%, which is quite a jump off the recent 2.18% lows. The US dollar (UUP) slipped and has now clearly broken below its 200-day M/A. While the dollar and the S&P 500 roughly move in sync, that relationship has widened as the chart shows:

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1. Moving the Markets

It was a mixed day with the major indexes looking for a catalyst that never materialized. Equities meandered, and only the Dow managed to eke out a meager gain of +0.04%. It’s been a sideways pattern with the S&P 500 closing 2,388, 2,387, 2,388, 2,384, 2,388, 2,391 and 2,387 over the past 7 days. Hat tip goes to ZH for these stats.

The Fed’s announcement of the direction of interest rates turned out as expected and was confirmed by their decision to keep monetary policy steady, however, the odds of a June rate hike jumped to 90%.

So, what about the atrocious 1^st qtr GDP growth of 0.7%? The Fed simply dismissed it as likely to be “transitory” and focused on assuring that job gains were “solid”, indicating that they would remain on track to raise rates at a “gradual” pace. We’ll have to wait and see how that turns out.

With the Fed more or less confirming their future rate hike intentions, it’s no surprise that Treasury yields headed north with 10-year closing at 2.33%; the US dollar jumped with UUP adding +0.39%, while precious metals continued with their recent downward trend with gold sinking to 6 week lows.

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