June Personal Consumption Expenditures met expectations

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Published Date 7/26/2024

Headlines this morning, at 8:30 am ET June PCE, month/month expected at +0.1% month/month reported at +0.1%, year/year +2.5% as anticipated and down from +2.6% in May. The core, where the Fed focuses (ex-food and energy) month/month expected at +0.1% increased 0.2% and year/year 2.6% unchanged from May but the estimate was for +2.5%. June personal income estimates month/month 0.4% increased just 0.2% after increasing 0.5% in May; personal spending as expected +0.3% and better than +0.2% in May.

The initial reaction in the bond market pushed the 10 year note down 3 bps to 4.22%: MBS prices +10 bps. Although month/month core was slightly higher than estimates it didn’t increase from May. Markets still looking for the first rate cut at the September FOMC meeting. The income and spending data continues to show the economy is holding well encouraging the Fed to cut and not upset the growing economy. The more sensitive 2 year note to Fed actions declined 0.2%, but picked up momentum as time went on.

At 9:30 am the DJIA opened +267, NASDAQ +136, S&P +32. 10 year at 9:30 am 4.21% -4 bp, 2 year 4.39% -5 bp. FNMA 6.0 30 year coupon at 9:30 am +16 bps from yesterday’s close and +22 bp from 9:30 am yesterday, the 6.5 coupon +5 bps and +7 bps from 9:30 am yesterday.

At 10 am the final University of Michigan consumer sentiment index thought to be at 66.0, increased to 66.4. The data is slower than in June as consumers continue to fret about the outlook and the coming election.

Next week the FOMC meeting but not expecting any change in the FF rate until September, in the meantime there are two more PCE inflation releases along with CPI and PPI. There are opinions increasing that the Fed will cut three times before the end of the year, but as we have noted numerous times those outlooks swing with each key data point. Also, next week July employment data.

Source: TBWS

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