US stocks experienced a mixed session overnight, with the NASDAQ advancing +1% while the Dow edged up +0.1%. The market rallied from early losses after the latest inflation read came in smack on expectations, allaying fears that it might follow recent disappointing prints. Both stocks and bonds (yields lower) rose as the Personal Consumption Expenditures Index (PCE) supported bets that the Fed will cut rates as early as June; while the PCE is above the Fed 2% target, it allayed concerns that the central bank was losing the battle against inflation.
- No change; we are looking for consolidation by US equities following their fourth consecutive month of gains, but the trend remains up.
MM remains short-term neutral toward the S&P500 around the 5100 level
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Following the in-line PCE print, US bond yields dipped, with the futures pricing in ~1% of cuts by the Fed come January 2025. For bonds to get excited on the upside (yields lower), we are going to need data coming in below the Feds target &/or an end to their constant commentary warning markets that rates will only be cut when the picture improves further on inflation, etc.
- We can see further consolidation by the US 2s around the 4.5% area, but our preferred scenario is an eventual break on the downside.
MM is bearish on US bond yields in the medium-term
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