When this morning\u2019s economic reports offered divergent implications for the Fed\u2019s dual mandate, traders \u2013 bond traders in particular \u2013 chose the one that offered the narrative they preferred.<\/p>\n\n\n\n
CPI inflation data is among any month\u2019s most anticipated reports.\u00a0From the FOMC\u2019s viewpoint it takes a backseat to the PCE Core Deflator, but it is widely followed and has broad ramifications for the economy, nonetheless. The September data was released this morning, and it was unpleasant. The monthly readings for both headline and core came in 0.1% above expectations, at 0.2% and 0.3% respectively. Those were unchanged from last month, but the consensus expectations were for drops of -0.1% for each. Someone might assert that an unchanged CPI rate indicates that prices are stable, but remember, that means prices are rising at a stable rate, not remaining stable. The past three Core readings of 0.3%, 0.3% and 0.2% also means that 3-month annualized Core CPI is 3.2%.\u00a0That\u2019s above 2%, last I checked.<\/p>\n\n\n\n
But if the stable prices portion of the mandate didn\u2019t deliver, the maximum employment portion did.\u00a0Weekly initial jobless claims rose to 258,000, above the 230k consensus and last month\u2019s 225k. There are some who asserted that this week\u2019s number might have been pushed higher by delayed claims coming from the areas affected by Hurricane Helene, but there was not enough granularity in the data to prove or disprove that idea. This was a time when skepticism took a back seat to desire.<\/p>\n\n\n\n
We saw 2-year Treasury yields drop by 5bp in the aftermath of the reports, and they stayed lower throughout the morning.\u00a0Stocks sold off a little after the report, with the S&P 500 (SPX) trading about -0.4% lower, but there was no follow-through.\u00a0After a couple of days of rallies, one might have expected some profit-taking, especially since both data points were economically unfriendly.\u00a0Instead, after meandering at lower levels, SPX turned modestly positive shortly after noon.\u00a0Buying dips and chasing momentum remain key factors.<\/p>\n\n\n\n
It is typically very important for investors and traders to maintain flexible mindsets.\u00a0Events can change rapidly, so it is crucial that we adapt to shifts in underlying facts and sentiment.\u00a0But it is not always as useful to fit one\u2019s trading to the desired outcome.\u00a0It can work when one can ride a trend, but trends have a way of changing unpredictably.\u00a0For now, we can get away with cherry-picking the news we like that fits our preferred narrative.\u00a0In the long-run, that can be a dangerous game.<\/p>\n","protected":false},"excerpt":{"rendered":"
When this morning\u2019s economic reports offered divergent implications for the Fed\u2019s dual mandate, traders \u2013 bond traders in particular \u2013 chose the one that offered the narrative they preferred.<\/p>\n","protected":false},"author":4,"featured_media":195923,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"_acf_changed":true,"footnotes":""},"categories":[145,146,147,8,12,153,148,7],"tags":[307,2324,2325,837,311,322,291,2326,383,316],"contributors-categories":[149],"class_list":{"0":"post-198710","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-ibkr-market-insights","8":"category-macro","9":"category-north-america","10":"category-region","11":"category-securities","12":"category-stocks","13":"category-text-articles","14":"category-traders-insight","15":"tag-2-year-treasury-yields","16":"tag-core-cpi","17":"tag-cpi-data","18":"tag-employment","19":"tag-fed","20":"tag-inflation","21":"tag-macro","22":"tag-pce-core-deflator","23":"tag-stock-market","24":"tag-stocks","25":"contributors-categories-interactive-brokers"},"pp_statuses_selecting_workflow":false,"pp_workflow_action":"current","pp_status_selection":"publish","acf":[],"yoast_head":"\n