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Market Commentary

Is The Economy Growing?

Posted on April 28, 2017

The 1Q GDP is announced today, and many are interested to see if consumer spending has returned. This may be a short lived headline, as most will turn their attention back to Washington where today's also the deadline for Congress to pass a Continuing Resolution to fund the government. Should be an interesting day!

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Good morning!

  • This morning it was announced 1Q GDP was 0.7% versus the projected 1.0%...GDP was 2.1% in the 4Q16
    • oThe quarter-over-quarter PCE measure was unchanged at 2.0% (this is the Fed's favorite inflation gauge)…still inflation under control
    • o Most analyst believe we will see a rebound in the second quarter, due to higher consumer spending and inventories
  • • All eyes are on DC today
    • o Seems like Congress will pass a weeklong stopgap plan today (many believe) so they have more time to prepare/approve a more thorough spending bill next week
      • • They also are back to work on a healthcare plan, which won't be voted on this week
    • o Not that the markets need any more stress
      • • The President told Rueters last night, "There is a chance that we could end up having a major, major conflict with North Korea. Absolutely, we'd love to solve things diplomatically, but it's very difficult."  "
    • o The continued uncertainty in DC will have the markets trading sideways until there is more clarity
  • • Yesterday
    • o Pending home sales pulled back 0.8% in March after a decent gain last month
      • • The index remains at a healthy level consistent with further gains in existing home sales
    • o The March durable goods report showed some momentum as March orders rose 0.7%, on top of a revised 2.3% gain in February
      • • However, core capital goods orders, which are a good proxy for future business investment, missed expectations increasing only 0.2%, below projections
    • o The White House released a statement late yesterday saying it will not immediately initiate the process for a NAFTA withdrawal, a reversal from comments in the afternoon
      • • Stayed tuned…a lot going on in DC!
  • • For next week:
    • o The ISM manufacturing report, FOMC meeting, and April employment report will be the key focus next week
    • o The FOMC is likely to stay on hold after raising rates in March, and there is no pre-scheduled press conference or updated economic projections…should be uneventful
    • o On Friday, many expect payrolls to bounce back from a low reading in march
      • • The consensus is now looking at over 200k jobs created in April with the unemployment rate unchanged at 4.5%
  • • In other news:
  • • Oil and gold up slightly this morning
  • • Treasuries
    • o 2-yr: 1.28%
    • o 10-yr: 2.33%
    • o 30-yr: 2.99%
  • • LIBOR
    • o 1-month: 1.00%
    • o 3-month: 1.17%
  • • Fed funds effective was 0.91%

Have a great weekend!!!


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