Good morning … NFP was strong. Buffet bails. ‘Earl is LOWER. Fed is straight ahead. Lets jump right in and get this SinkO de MAYO party started … I’ll begin with another monthly visual (in addition to those already offered, (5yy, 10yy and 30yy))it’s time to dive into the front - end to take some ‘temperature’ and see what, if any signals (or noise) exists …
2yy MONTHLY: triangualting range HOLDING …
… while MONTHLY momentum is more bearish than not … make / take from it whatever you will but know that couple ways this can / will resolve is by higher rates OR time (rate cuts?) at a price …
… AND I’ll be done and move right along … here is a snapshot OF USTs as of 701a:
… HEREis what this shop says be behind the price action overnight…
… WHILE YOU SLEPT Treasury futures firmed in Asia following NFP-inspired losses Friday, though light volumes and a UK bank holiday has made for a choppy twist-steepening into US hours. Tokyo flows were noted to be surprisingly firm given the lack of investor participation today, while the US handoff has seen a modest bullish shift into 7am with the front-end leading. S&P futures are showing risk-off conditions amid a -0.8% drop, while Gold is soaring +2.3%, and Crude is -1.6%. The DXY is off -0.4% amid a -2.1% decline in USDKRW and USDJPY -0.8%. US 2s10s is 2.5bps steeper and US invoice spreads are -0.7bps tighter…
… for somewhat MORE of the news you might be able to use … a few more curated links for your dining and dancing pleasure …
NEWSQUAWK US Market Open: Crude sinks after OPEC+ hikes supply, US equity futures & USD lower into ISM Services … USTs rangebound with price action subdued amidst a number of holidays … USTs are trading in a very narrow 111-06 to 111-13+ band and essentially unchanged on the session. Currently entirely within Friday’s relatively expansive 111-02 to 112-01+ band. A quiet start to the week in terms of price action as Japan was away overnight and as such, there was no cash trade. Furthermore, the European session is devoid of the UK given the nation's early-May Bank Holiday. On the trade front, Trump said he is willing to lower the tariffs on China at some point as the current levels have essentially stopped trade. Elsewhere, the US announced 100% tariffs on movies produced in “foreign lands”; of note for China, the world’s second largest film maker. US ISM Services is due later.
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’ …
A(nother) FOMC meeting precap for your dining and dancing pleasure …
5 May 2025 Barclays: Federal Reserve Commentary: May FOMC preview: Waiting for the storm
We expect the FOMC to keep policy rates unchanged amid elevated uncertainty, tariffs, rising inflation expectations and a deterioration in household and business sentiment, and Powell to signal the FOMC is in no rush to cut rates. Our baseline call has two 25bp cuts this year, in July and September.
The FOMC will likely keep policy rates unchanged at 4.25-4.50% this week as the FOMC awaits greater clarity on the evolution of the economy in the face of elevated policy uncertainty, new tariffs, rising near-term inflation expectations and a deterioration in household and business sentiment.
We expect the May FOMC statement and Powell to acknowledge that some market- and survey-based measures of near-term inflation expectations have moved up, and that surveys of households and businesses indicate a decline in sentiment and elevated uncertainty about the outlook.
At the press conference, we expect Chair Powell to signal that the FOMC is in no rush to adjust rates. We expect him to emphasize the need to keep longer-term inflation expectations well anchored to make certain that a one-time increase in the price level does not become an ongoing inflation problem, and to mention that if the FOMC's dual objectives come into conflict, the FOMC will likely adopt a balanced approach.
In our baseline projection, we expect the FOMC to cut rates twice 25bp this year, in July and September, and again twice in 2026. In doing so, we think the FOMC will maintain a policy stance that remains somewhat restrictive so that inflation ultimately returns to the target over time, but it would avoid having policy becoming increasingly restrictive as the economy slows and the labor market deteriorates…
A month after Liberation Day, market moves suggest a verifiable rotation out of US assets into EUR markets, but more time may be needed to verify a broader diversification process. Patience, you must have
With data suggesting minimal changes to foreign demand for USTs, the Treasury market appears better supported. Next week’s FOMC decision seems unlikely to change much for rates.
Oil markets seem to be drifting toward our grey swan risk for 2025, i.e. weaker OPEC+ unity and a path to $40/bbl.
… the robots are coming , the robots are comin …
May 4, 2025 MS: Sunday Start | What's Next in Global Macro: Humanoids: The Looming Phase Shift in AI
A core strategy of Morgan Stanley Research is combining deep sector and macro expertise with a global footprint and collaborative culture to identify investment themes that help our clients generate alpha. Over the past 30 years, fewer than 3% of stocks drove the entire $80 trillion of global equity market expansion. These stocks tend to sit at the center of the most important investment themes. We expect our four key themes for 2025 – AI Diffusion, Longevity, Future of Energy, and Multipolar World – to regain their leadership positions and even accelerate as markets calm…
…The path to widespread humanoid adoption is unlikely to be linear, especially in an increasingly multipolar world. While robots have become adept at repetitive tasks such as materials handling, fine motor skills and integrating real-world data remain elusive. Investors should look for advancements in software that are accompanied by both supply chain disruption and tighter regulation. Our global research teams are laser focused on the theme, and we look forward to guiding you on the journey.
Investors remain somewhat cautious from our dialogue, but constructive price action driven by hope for a China trade deal has prompted an influx of questions around what exactly the market is signaling here. In today's report, we address 8 key questions and highlight our top trade ideas…
… AND apparently an economic ship has sailed. WHICH one, you ask? Welp, you’ll have to read to find out …
May 5, 2025 MS: The Weekly Worldview: Has the ship sailed?
The front-running of imports into the US see sudden declines, and we look for insights from high-frequency shipping data.
… The main indicators in Asia tell a bit of a more-nuanced story. Recent Chinese PMIs for new export orders fell dramatically. And while the flow to the US is clearly lower, overall port callings in China have not decelerated as much as might be expected if there were total cessation in trade to the US. Notably, South Korea’s exports—a key proxy for overall Asian trade—were down more than 10% through April 20th, but recovered significantly in the final 10 days of the month, leaving the full-month decline in single digits. Indeed, we are seeing an increase in traffic to other parts of Asia, suggesting a redirecting of trade. Re-direction of Chinese manufacturing capacity is not a new phenomenon, but it will take time to see how much of the flow is re-routing but ultimately to the US versus China finding new markets. Following the first Trump administration, China adjusted its exports to become a bit less dependent on exports to the US.
In our deep dive into supply chains a couple of months ago, we sought to answer how tariffs might affect supply chains. Broadly, we found some products could shift to production in Vietnam, India, and other neighboring countries, but the scope of such products was rather narrow in the short run. After five years of nearshoring, we found that despite a fall in direct imports to the US from China, China remained the largest global source of manufactured goods. Put more simply, to re-orient underlying factors of production will take time and involve considerable costs.
There are two key takeaways. First, data will still be very volatile in the short run, but the front running in imports to the US may lend itself to a gradual slowdown in the broader economy and hard data. In the past, tariffs have pushed up prices after a couple of months and pushed down growth after a couple of quarters. The shipping data affirm that disruptions are happening, but the impact has not yet been felt. If so, our call for the Fed being patient is reinforced, and in particular it contradicts the market pricing of a rate cut in June—after Friday’s data, the market moved toward our view. Second, over the next year or two, we think growth will be meaningfully lower, and because supply chains took decades to optimize, they will not be reversed quickly.
… and here’s a topical note given goings ons in DC with regards to student loan / financing …
May 5, 2025 MS: US Economics, Consumer Finance, & US Rates Strategy: Student Loan Repayments: Expectations and Implications
Collections on defaulted federal student loans are beginning. We estimate payments will increase by $1-3bn/month. The GDP impact is relatively small, but this is another headwind for 10-15mn consumers. More consumption headwinds should drive lower implied Fed policy rates and a steeper UST curve.
Key takeaways
For the first time in 5 years, collections on defaulted federal student loans are resuming, and consumer credit scores can now take hits on these loans.
We estimate ~5.5mn defaulted borrowers with total loans of $115bn, and 7-9mn delinquent borrowers with up to $250bn. The DQ rate is well above 2019 levels.
We expect a rise in monthly payments of ~$1-3bn could lower real GDP growth by 0.05-0.15pp in '25. Younger, middle-income consumers are impacted most.
Payment resumption & default collections are an added risk to consumer DQs re-accelerating into 2026, at the same time as we see a tariff-induced slowdown.
More consumption headwinds may further dampen investor growth expectations, allowing for lower implied Fed policy rates and a steeper UST curve.
Swiss economist on do-nothin’ Fed …
05 May 2025 UBS: Doing nothing in an uncertain world
Investors await the Federal Reserve’s Wednesday policy decision. There is little expectation of a rate change. Preliminary April employment data showed reasonable strength although some areas of job growth (e.g. trucking) are clearly vulnerable as import volumes slow.
The Fed’s main problem is inflation uncertainty. There is little confidence in what future trade taxes will be. Overnight, US President Trump declared a 100% tax on imported movies—Mr Bean is seemingly a national security threat. There are reports of China rerouting trade to the US (China rerouted up to a third of its exports to partially avoid Trump’s first-term taxes).
The Fed would probably need to take into account retailers’ attempts to instigate a further round of profit-led inflation. There have been social media posts showing companies adding (implausibly) large tariff charges to bills. Tariffs apply at the point of import, so each 10% tariff should mean around a 4% consumer price increase. These reports might be scare tactics—it is possible that partisan bias has infiltrated social media.
Today’s data does not add much to anyone’s economic understanding, being mainly service sector sentiment polls. It is possible that survey comments will give a hint as to how corporate decisions are impacted by unpredictable policy.
US employers are confounding the naysayers–and complicating the Federal Reserve's decision this week. It's no secret that President Donald Trump wants the Federal Open Market Committee to cut interest rates at its May 6-7 meeting. Yet the economy isn't cooperating, as companies added a robust 177,000 jobs in April (chart). US average hourly earnings, meanwhile, are up 3.8% over the past 12 months. All this means the Fed is in no hurry to cut the federal funds rate.
In an April 16 speech, Fed Chair Jerome Powell reiterated that the Fed is "always focused on the dual mandate goals" of maximum employment and stable prices. Friday's jobs data probably did little to change Powell's sense that "despite heightened uncertainty and downside risks, the US economy is still in a solid position." Or that the labor market is "at or near maximum employment" while inflation "is running a bit above our 2% objective."
A bunch of data reports out this week will likely confirm this assessment of the economy:
(1) Services PMI. Services employment remains robust enough to help offset trade headwinds. The 156,000 jump in private service-providing industries augurs well for April's non-manufacturing purchasing managers' index (Mon). It probably remained solidly above the 50.0 mark denoting expansion (chart). That's despite indications to the contrary emanating from the March NM-PMI employment reading of 46.2%, anomalously low (which didn't make much sense to us).
(3) Merchandise trade. Reading trade dynamics these days through the haze of tariffs and frontloading efforts is far more fraught than usual. But last week's advance report on the March merchandise trade deficit confirmed that the final report (Tue) will show a record trade gap attributable to soaring imports. The 0.3% contraction in Q1's real GDP was mostly due to the jump in imports. If imports normalize in the second quarter, though, GDP growth should get a boost.
(4) Inflation expectations. Evidence of tariff-induced price pressures seems more persuasive than hints of economic weakness. The New York Fed's March survey of 12-months ahead inflation expectations (Thu) jumped to a 3.6% rate from 3.1% a month earlier. Given the University of Michigan survey's 6.5% year-ahead inflation level in April, the highest since 1981, things could get worse. The Fed has to be concerned that inflation expectations are not "well anchored."
AND finally, a(nother) Apollo 13 mkt reference … and whats important here is that Dr. Bond Vigilante, himself, is LOWERING ODDS OF RECESSION … why? cuz of the mkt move back UP and so, once again, reiterating how it is NARRATIVES FOLLOW PRICE and never … NEVER the other way ‘round …
Today, we are lowering our subjective odds of a recession from 45% to 35% following last week's news that China and the US might be moving toward starting trade negotiations. We also remain impressed with the resilience of the US economy following Friday's employment report. However, we are not raising our 6000 year-end target for the S&P 500.
Our QuickTakes dated April 24 was titled "Strongest Buy Signal Ever?" We reiterated that "[w]e still believe that the latest correction in the S&P 500 bottomed on April 8, a day before Trump basically postponed 'Liberation Day.'" A week ago in MARKET CALL, we briefly mentioned that a bullish Zweig Breadth Thrust might be in play.
On Friday, the S&P 500 notched its first nine-day winning streak since November 2004 (chart). While the index had many seven- and eight-day streaks in recent years, the nine-day consecutive winning streak had proved elusive for the past two decades—until Friday. The S&P 500 now exceeds its close on Liberation Day, just before Trump announced his reciprocal tariffs on the world after the close. It also exceeds its 50-day moving average and is only 7.4% below its record high. Its 18.9% correction lasted from February 19 to April 8.
The Nasdaq also rose above its 50-day moving average last week and is only 10.9% below its record high (chart). Its 24.3% bear market lasted from December 16, 2024 through April 8, 2025.
On a year-to-date basis, the S&P 500 is down only 3.3%, with MAGS down 11.7% and XMAGS up 0.9% (chart).
The S&P 500's correction wasn't solely about Trump's tariffs. Investors questioned whether the Magnificent-7 and other technology companies were spending too much on AI infrastructure, especially after DeepSeek was introduced on January 24. The S&P 500 Data Center REIT took a deep-six dive, but has rebounded since April 8 (chart).
… And from the Global Wall Street inbox TO the intertubes, a few curated links …
Showtime at the Apollo …
May 5, 2025 Apollo: How Are Firms Responding to Higher Tariffs?
The Fed survey released this week shows how companies are responding to higher tariffs, and the first chart below shows that the top response is that companies are passing cost increases through to consumers.
The bottom line is that inflation will be rising significantly over the next six months, see also the second chart.
The Terminal dot COM …
May 4, 2025 Bloomberg: Bond Traders Swing to Powell’s Side as Trump Calls for Rate Cuts
Fifteen minutes after the April employment report hit early Friday, President Donald Trump seized on the surprisingly strong job growth to ratchet up his pressure on Federal Reserve Chair Jerome Powell, saying there was no reason to hold off on cutting interest rates.
Bond traders came to the exact opposite conclusion.
The pace of hiring — as well as a manufacturing report on Thursday that wasn’t as downbeat as expected — drove traders to dial back rate-cut bets that had steadily mounted as Trump’s trade war unleashed havoc in financial markets and sowed fears of a US recession.
After piling into short-term Treasuries, anticipating the Fed would start easing policy as soon as next month to contain the fallout, they reversed course. Two-year yields shot up, staging the biggest two-day jump since October, and futures traders started pricing in what Fed officials have been consistently trying to drive home — that they will remain in wait-and-see mode until there’s more evidence that the economy has turned.
“With inflation being above the Fed’s target, tariffs which can move prices higher and a still solid labor market, I think the Fed is unlikely to do anything,” said Priya Misra, portfolio manager at JPMorgan Asset Management. “But they are data dependent and the data could turn weaker by the time the Fed meets mid-June.”
The latest data underscored the vexing reality that has whipsawed markets ever since Trump stepped up his US-against-the-world trade war a month ago, triggering the type of volatility that hadn’t been seen since the pandemic or the 2008 credit crisis as his pauses, threats, and overtures to negotiations made it virtually impossible to forecast how it will all play out.
It is almost certain to eventually slow the US economy as businesses supply chains are upended, consumer confidence tumbles, and the tariff increases that are in place deliver at least a temporary inflation shock. Yet with the outcome in limbo and much of the impact yet to be felt, the economy — through last month, at least — has remained resilient enough to send the S&P 500 Index rebounding back to where it was before Trump’s April 2 tariff rollout.
“Data right now is fine, and the Fed likes to move slowly,” said Ed Al-Hussainy, rates strategist at Columbia Threadneedle. “That leaves the rate-cut expectations vulnerable.”
Futures contracts are now pricing in that the Fed is likely to hold its benchmark rate steady until July or September, after earlier last week putting strong odds on a rate cut as soon as the June meeting. After the jobs data was released Friday, economists at Goldman Sachs Group Inc. and Barclays Plc both pushed back their forecast for the next cut to July from June.
… a few words on Uncle Warren from one of the good ones ‘out there’ (who IS on TV time to time, as opposed to this here rookie !!) …
May 04, 2025 TKer by Sam Ro: Warren Buffett: 'The long-term trend is up'
OMAHA, Neb. — Warren Buffett, CEO of Berkshire Hathaway, remains bullish on the long run. At the same time, he acknowledges that people will continue to be distracted by short-term market moves, which will continue to be unpredictable.
“The long-term trend is up,“ Buffett said at Berkshire’s annual shareholders meeting on Saturday.
“Nobody knows what the market is going to do tomorrow, next week, next month,” he added. “But they spend all their time talking about it, because it's easy to talk about. But it has no value.”
Buffett was responding to a shareholder’s question about Berkshire’s massive cash pile, which grew to $347 billion in Q1. He reiterated what he said in his annual letter, which was that his preference is not to be sitting in so much cash. But he made clear that holding cash was smarter than making brash acquisitions.
“We would rather have conditions that have developed where we would have like $50 billion or something like that,” he said. “But that just isn’t the way the business works.”
Buffett explained if he acquired businesses or accumulated stock solely for the sake of getting that cash pile down to $50 billion, “That would be the dumbest thing in the world to invest in that manner.”
For now, Buffett believes it’s better to keep dry powder for when Berkshire could be “bombarded with offerings” that offer better risk-reward opportunities than what he’s seeing today.
“We have made a lot of money by not wanting to be fully invested at all times,” he said.
Of course, this strategy is not for everyone. Buffett and Berkshire are in the business of acquiring companies and picking stocks. In fact, Buffett has historically recommended most people to invest in passively managed S&P 500 index funds.
“We don’t think it’s improper for people who are passive investors to just make a few simple investments and sit for their life in them,” he said. “But we’ve made the decision to be in this business. So we think we can do a little better than that.“ …
AND from my family to yers …
…. I’ll show myself out and … THAT is all for now. Off to the day job…
Sinko de Mayo(nnaise)........Cracking me up !!!!!!!
Excellent work......