Good morning … The day has come and some known unknowns are to become known.
The markets ‘price’ for longer-term money as evidenced by the 30yr yield …
30yy DAILY: 4.50% seems important to me … where ‘X’ marks A spot …
… momentum moved towards overBOUGHT as yields at what appear to be ‘crossroads’ of sorts. Yogi Berra once said, when you get to the fork in the road, take it …
… is increasing due to increased macro economic stresses becoming more evident by the moment …
ZH: Manufacturing PMIs Sink Despite Surge In 'Hard' Data; Prices Paid Spike To 3-Year-Highs
ZH: JOLTs Job Openings Drop Despite Odd Jump In Federal Openings; Hires Hit 5 Month High
… while the Fed is said to control the front-end of the curve, the FedFunds rate then often offers a guide (cap) for instruments further out … As this afternoons announcement moves into the KNOWNS column, folks can / will start to get their arms around impacts here and ‘there’ ultimately forming new narratives, which ALWAYS follows price.
For now, though, I am looking at the chart above and realize fully that we’ve seen the Atlanta Fed GDPNow move to price in a significant slowdown in recent weeks …
NEWSQUAWK US Market Open: Cautious risk tone ahead of reciprocal tariff updates on ‘Liberation Day’ … Bonds largely in a holding pattern as we await the Rose Garden speech … USTs are largely in a holding pattern overnight after coming under pressure in the US afternoon/evening on the more favourable tariff reports via CNBC, marked a 111-15 overnight low. More recently, modest upside occurred in the early European morning as the general tone deteriorated a touch. Ahead, markets will await trade updates from Commerce Secretary Lutnick at 08:30 EDT and then President Trump at 16:00 EDT. US data by way of ADP and Factory Orders is also due today, but ultimately may play second fiddle on "Liberation Day".
Finviz (for everything else I might have overlooked …)
Moving from some of the news to some of THE VIEWS you might be able to use… here’s some of what Global Wall St is sayin’ …
ISM. Worse than it looked …
1 April 2025 Barclays: ISM manufacturing: Worse than it looks
The ISM manufacturing PMI dropped below 50 for the first time this year, reflecting softening production, employment, and new orders. Although precautionary stockbuilding has helped mute declines for now, respondent anecdotes point to intensifying tariff uncertainty and cost fallout.
… same shop on JOLTS jobs … ‘slightly moderating’ cannot be good, right?
1 April 2025 Barclays: February JOLTS: Slight moderation in labor demand
Job openings declined to 7.568mn in February, after ticking up in the prior month, and layoffs and discharges moved up slightly. The hiring and separation rates remained constant, indicating limited change in employment plans by firms, despite significant trade and tariff uncertainty.
… POSITIONS update …
01 Apr 2025 BNP: US Rates Positioning Index: PRISM – 28 March 2025
KEY MESSAGES
PRISM fell just 1 point to +17.
Component breakdown: Market risk and momentum rose; speculator presence and sentiment fell; dealer presence was unchanged.
Speculator presence fell 13 points as non-commercial hedgers' positions fell 7.7mn $DV01 with selling focused in TY.
Focus this week lies on the details of Trump's "Liberation Day" and Friday's nonfarm payrolls number, where we believe our long 10y TIPS trade is well-positioned into both events.
Although we expect 145k jobs were added in March, we believe the market (and the Fed) will be much more sensitive to a lower print, especially if it falls below our expected breakeven pace.
Sticky goods inflation is already starting to weigh on consumer confidence and consumer spending ahead of tariff implementation, with markets concerned this will soon trickle into business investment and hiring practices.
We think the market is likely to latch onto any signs of an imminent growth slowdown in the hard data, given the deterioration already seen in much of the soft data.
The divergent combination of weak growth and high inflation leaves us comfortable with an "inflation-protected" long bias.
… Ahead of today’s announcement, fears about stagflation in financial markets continued to mount even if markets had a pretty positive day yesterday. The stagflation fears were exacerbated by the latest batch of US data, where the ISM manufacturing print fell back into contractionary territory with a 49.0 print (vs. 49.5 expected). Moreover, the new orders component fell to a 22-month low of 45.2, whilst the prices paid component surged to 69.4, which is the highest it’s been since June 2022. The weaker ISM release saw the Atlanta Fed’s GDPNow Q1 estimate (adjusting for trade in gold) fall to a new low of -1.4%, while the model’s estimate of real private domestic final sales, which are much less distorted by trade volatility, fell to a still positive but weak +0.4%.
The data is continuing to support the narrative of weaker growth and higher inflation, with market-based inflation expectations continuing to rise. The US 1yr inflation swap (+0.6bps) moved higher for a seventh session in a row to another two-year high of 3.25%, though it did retreat after trading +5.0bps intra-day. The reversal during the afternoon session may have reflected emergent reporting that more modest tariff options were still in play, which also helped gold prices (-0.17%) post a modest decline after touching an new record high of $3,149/oz intra-day. As a reminder, gold saw its strongest quarterly performance since 1986 in Q1. This was among the notable highlights from Henry's Q1 performance review (link here)…
… and the worst part was … ‘flation …
April 1, 2025 First Trust: The ISM Manufacturing Index Declined to 49.0 in March
The ISM Manufacturing Index declined to 49.0 in March, lagging the consensus expected 49.5. (Levels higher than 50 signal expansion; levels below 50 signal contraction.)
The major measures of activity were all lower in March. The new orders index declined to 45.2 from 48.6, while the production index fell to 48.3 from 50.7. The employment index declined to 44.7 from 47.6 in February, while the supplier deliveries index fell to 53.5 from 54.5.
The prices paid index jumped to 69.4 in March from 62.4 in February.
Implications … Finally, the worst part of the report is that inflation remains a major problem. Prices paid by companies rose again in March and the pace accelerated, with the index jumping to 69.4. That is the highest index level since the surging inflation of 2022, even as manufacturing stagnates. Not a good sign for the economy. We hope the Federal Reserve has the resolve to stomp the embers of inflation out, despite the short-term economic pain that may result from federal policy changes – pain that will ultimately pave the way for long-term growth…
AND here’s word directly from ‘the horses mouth’ … better late than never …?
30 March 2025 | 7:27PM EDT Goldilocks: US Equity Views Higher tariffs and weaker growth reduce our earnings estimates and S&P 500 return forecasts
We reduce our S&P 500 3-month and 12-month return forecasts to -5% and +6% (previously +0% and +16%). Based on market prices at the end of last week, these suggest S&P 500 index levels of roughly 5300 and 5900, respectively….
From the desk who’s been nothing if not consistently vocal BULL … get and stay REAL
April 2, 2025 MS: US Rates Strategy: Stay Long 2-year Real Yields
There is little clarity around reciprocal tariffs but front-end real yields look attractive going into the announcement as economic data have started to show some signs of economic slowdown. 5-year breakevens optically look rich but we remain neutral amid uncertainty around tariffs.
Key takeaways
Front-end real yields remain attractive going into tariff announcements and as a long-term trade.
1y1y trading range-bound despite the 1y moving higher implies that markets are more concerned about future economic growth than sustained inflation.
Beta-weighted breakevens versus Treasuries appear rich but most of the richness can be attributed to the 1y point as the forwards look comparatively cheap.
We have seen continued inflows to TIPS ETFs since November 2024 and TIPS trading volume has also shown a sustained increase over the past year.
We launch our estimate for core CPI fixing for the next inflation print on Bloomberg – MSCPIFIX Index.
Have truer words ever been spoken …
02 Apr 2025 UBS: Economists’ ignorance is the problem
Economists know what they don’t know. US President Trump is expected to announce the largest peacetime tax increase in US history. The erratic nature of trade policy, uncertainty about whether legal procedures will be followed, limited clarity about end-objectives, the possibility that Trump will again retreat from some taxes, and the unpredictability of patronage-style deals to gain exemptions create uncertainty about the direct effect of the taxes. The second-round effects depend on unpredictable reactions by US companies, a far more complex global trade system than existed 20 years ago, and US consumers whose reaction to inflation has shifted.
Does this uncertainty matter? It does. If all-knowing economists are in ignorance, companies and consumers will surely be uncertain about the future. That may impact their economic decisions, changing economic outcomes. Clarity and certainty are now very desirable market commodities.
Politics in the US are shifting. Two special election victories in Florida give US Speaker Johnson a larger notional majority in the House of Representatives. However, the elections’ swing in support in favor of the Democrats might impact the position of Republicans with small majorities.
The calendar is subordinate to the tax announcements today. There are several ECB speakers (markets are comfortable with an April rate cut). Fed governor Kugler speaks on inflation expectations.
BACK to contraction …
April 1, 2025 Wells Fargo: ISM Manufacturing Back in Contraction as Tariff Pressure Bites
Summary The ISM manufacturing index slipped back into contraction as manufacturers come to grips with tariff policy. A front-running of tariffs and shift to minimize import exposure is driving up prices, while persistent uncertainty is crimping underlying demand and leaves manufacturers longing for clarity.
Uncertainty does NOT spur activity … don’t just do something, SIT THERE …
April 1, 2025 Wells Fargo: February JOLTS: Uncertainty Can Be Paralyzing
Summary After a solid fourth quarter, labor demand is showing additional signs of moderating in the early innings of 2025. Job openings slipped to 7.57 million in February and the ratio of job openings to unemployed workers fell back to 1.07—its lowest since September 2024. With renewed headwinds to growth, further declines in vacancies risk signaling outright weakness rather than a return to a balanced labor market.
… And from the Global Wall Street inbox TO the intertubes, a few curated links …
Confidence. It’s NOT whats for dinner …
April 2, 2025 Apollo: Corporate Confidence Declining
Surveys of CEOs and CFOs show that corporate confidence has declined in recent months, see charts below.
Positions matter …
April 1, 2025 at 8:30 PM UTC Bloomberg: Traders Bet on Treasuries Rallying More on Trump’s Trade War
… a VIEW from The Terminal …
April 2, 2025 at 5:00 AM UTC Bloomberg: From Lehman to Liberation, don't trust first takes The market’s initial reaction to a big event can be very wrong. Meanwhile, there are other things to look at.
… It’s a mug’s game to to analyze a decision due within a matter of hours. We have to wait and be prepared to react. The best analogy in my experience was the Lehman Weekend of September 2008, when traders left on Friday knowing that their world might change if Lehman Brothers couldn’t be rescued by Monday. It wasn’t. With no good precedents, the implications of Lehman’s bankruptcy rolled out over a matter of days, driving a massive selloff and soon forcing a change of direction by the US government. As I wrote that Friday, the “long view” was “anything that went much past Sunday evening.”
Liberation Day could prove just as transformative, in a good or bad way, or it might be a non-event. Whatever happens, don’t trust the initial market reaction. Somehow, the S&P 500 finished the week of the Lehman bankruptcy higher than it had started, thanks to the government’s TARP rescue plan. That was a false move:
We all need to keep our wits about is in the days ahead. There’s some suggested tariff reading in the Survival Tip. Beyond that, we’ll await the facts before trying to analyze further. There are some other, more established things to cover…
… The Liberation Day hype has already had real-world consequences. That was clear from the latest Institute of Supply Managers survey of US manufacturers, published Tuesday. The overall number fell, suggesting a growing risk of recession. But the eye-catching data came on the balance between new orders and inventories. As the chart shows, inventories exceed new orders by the greatest amount in four decades, with the sole exceptions of the worst months of the Global Financial Crisis and the Covid lockdowns:
This is not healthy. If companies have a lot of stuff on hand, and few orders, they will likely do less business and activity will fall. By contrast, when inventories are low, there’s a chance of a restocking boom as companies ramp up to meet demand. On this occasion, tariffs are an obvious explanation.
Question on many minds (including MINE) …
2 April 2025 LONGVIEW ECONOMICS: US 10-year Treasuries: How Much Further to Run?
After rallying by ~3.6% between mid-February and the start of March (& pushing above their 200-day moving average), bond prices have begun to lose momentum. Yields, in other words, have stalled (fig 1) — and bonds are now close to overbought levels (see fig 1a).
Fig 1: US 10 year government bond yields shown with 50 & 200-day moving averages
Fig 1a: Medium term RSI (US bond futures) vs. bond futures prices
… All in all, therefore, while the near-term picture suggests some caution (with bond prices currently overbought), the broader macro and positioning backdrop still points to the potential for further upside, especially if incoming data reinforces the mid-cycle slowdown narrative. This week’s labour market & ISM data, coupled with the April 2nd tariffs announcements, will be particularly interesting in that respect…
Wolf on JOLTS …
Apr 1, 2025 WolfST: Underlying Labor Market Dynamics Still Tight Despite Highest Gov Layoffs & Discharges since Census Wind-Down of 2020
Hiring Begins to Shift to Private-Sector where Hiring Jumped, while Hiring by Governments Slumped.
…The figure Powell cites a lot: The number of job openings per unemployed person dipped to 1.07 job openings for each person who was unemployed and looking for a job during the reference period (7.57 million openings for 7.05 million unemployed).
The low point was in September, when the Fed got spooked by the direction of the trend, but just then the trend changed.
