One of inflation\u2019s strongest allies, consumer spending, showed no signs of weakening in March, according to this morning\u2019s personal income and outlays report from the US Bureau of Economic Analysis. Folks maintained their robust activity amidst a persistent decline in the propensity to save. March consumption rose a whopping 0.8% month over month (m\/m), exceeding the anticipated 0.6% by a wide margin and matching February\u2019s pace. Goods receipts performed stronger than services, as expenditures on non-durables and durables rose 1.5% and 1% m\/m, while services slowed to 0.6% during the period. Incomes, however, only rose 0.5%, in-line with the Street and loftier than the previous month\u2019s 0.3%. The spread between spending and incomes drove the personal savings rate to its lowest level since October 2022, raising the odds of a downturn later this year.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Price pressures are still sticky as illustrated by this morning\u2019s release of the Personal Consumption Expenditures (PCE) Price Index, which increased 0.3% m\/m and 2.7% year over year (y\/y) in March, matching estimates on the monthly reading but arriving loftier than the 2.6% y\/y median expectation. In comparison, February\u2019s figures came in at 0.3% m\/m and 2.5%. The core PCE figures, which exclude food and energy due to their volatile characteristics, rose 0.3% m\/m and 2.8%, the same paces as February, but the yearly figure came in much hotter than the 2.6% projected.<\/p>\n\n\n\n Past performance is not indicative of future results<\/p>\n\n\n\n Businesses appear to be increasing their digital advertising budgets while PC manufacturers are anticipating growing demand after a period in which consumer goods sales have been week. Those are observations from the following earnings calls: <\/p>\n\n\n\n Markets are rip-roaring higher with stocks up significantly across the board alongside lower yields on the back of robust earnings performances from the tech behemoths and CEO Furner\u2019s deflationary outlook. Currency markets are pointing to some risks, however, with the yen getting crushed as the Bank of Japan decided to not raise rates at its meeting today. Furthermore, Governor Kazuo Ueda didn\u2019t present a currency intervention strategy, disappointing investors who responded by raising their hands for more dollars. Which dollars? Any of them: they\u2019re all gaining relative to the Japanese currency.<\/p>\n\n\n\n All major equity indices are higher on the session with the tech-heavy Nasdaq Composite leading the charge and the S&P 500 not far behind; they\u2019re up 1.6% and 1%. Cyclically tilted names are underperforming though, as the Dow Jones Industrial and Russell 2000 benchmarks are up a more modest 0.2% and 0.5%. Sectoral breadth is split, with 6 out of 11 sectors higher. Driving the upside are the communication services, technology and consumer discretionary segments, which are higher by 2.4%, 1.5% and 1%. Energy, utilities and financials are offsetting bullish momentum in the other areas, with the components lower by 1.6%, 1% and 0.3%. Treasury yields are lighter as market players pray that disinflation is around the corner. The 2- and 10-year maturities are trading at 4.98% and 4.67%, 1 and 4 basis points (bps) south on the session. The dollar is gaining as currency watchers view the Fed as more hawkish than other central banks. The greenback\u2019s index is trading at 106.15, 55 bps higher so far today as the US currency gains relative to all of its major developed market currencies, including the euro, pound sterling, franc, yen, yuan and Aussie and Canadian dollars. Middle Eastern tensions are rising modestly today, with some attacks occurring near the Red Sea and in southern Israel. The conflicts are causing WTI crude oil to trade higher by 0.3%, or $0.29, to $84.03 per barrel, as traders monitor whether any supplies may be compromised. Copper and gold prices are near the flatline, meanwhile. <\/p>\n\n\n\n Today\u2019s PCE data points to potential trouble ahead for the consumer. While folks are spending like there\u2019s no tomorrow against the backdrop of sticky inflationary pressures, the next day will probably arrive. The basement level of savings is occurring as the Fed is constrained from reducing rates just yet, which signals a long road across the monetary policy bridge. If the consumer taps out during our journey to the other side of the overpass, then we will enter recession. Today\u2019s odds of that occurring aren\u2019t high at 30%, but well worth monitoring. <\/p>\n\n\n\n![\"Tomorrow](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/04\/Picture2-14.png\")
<\/figure>\n\n\n\nThe Fed\u2019s Nemesis Just Won\u2019t Quit<\/strong><\/h2>\n\n\n\n
![\"Inflation](\"https:\/\/ibkrcampusdev.wpengine.com\/wp-content\/uploads\/sites\/3\/2024\/04\/Picture1-26.png\")
<\/figure>\n\n\n\nAdvertising Revenues Climb and Personal Computer Demand Grows<\/strong><\/h2>\n\n\n\n
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Fundamentals Drive Market Rally<\/strong><\/h2>\n\n\n\n
Consumer Outlook is Troublesome<\/strong><\/h2>\n\n\n\n