7/19/24 – “Powell pivots again” – This time we agree.

There was a host of Fed speakers this week including Chair Powell before the Economic Club of Washington DC.  All of them reiterated the Chairman’s testimony before congress last week that they are pleased with the cooling inflation and somewhat concerned about the jobs market.  Powell added that “he’s very happy doing the job” of Fed chair and that he’ll stay in office until his term ends in May 2026.

The “fly in the ointment” to that narrative was the retail sales report for June.  The expectation was for a negative surprise as consumers would continue with the restraint they demonstrated for the last few months and the depressed auto sales due to the software glitch that made car buying challenging.  Instead, retail sales excluding autos and gas rose 0.8% over the previous month and the May retail sales were revised higher to +0.3% from 0.1%.

Housing starts also flashed good news in June with the month-over-month rising 3.0% and the May rate of starts revised higher, albeit from deeply depressed levels and driven primarily by multi-family construction projects.

Finally, initial claims for unemployment insurance rose to 243,000 matching the highest level in nearly one year, but part of that was blamed on Hurricane Beryl, the storm that lashed Texas last week.  The result was slightly higher bond yields across the curve.   Both the 2-year and 5-year US Treasury note are trading 5bps higher for the week to close near 4.50% and 4.16%, respectively.