Growth Meets Expectations – US Market Wrap

The world’s largest bond market rose after the latest batch of economic reports reinforced speculation that the Federal Reserve will be able to cut interest rates this year to prevent a bigger US slowdown.

Traders gearing up for the Fed’s favoured inflation gauge piled into Treasuries as several data points illustrated a downshift in growth tied to the central bank’s higher-for-longer stance. The government marked down personal spending to an annualised 1.5% in the first quarter. Separate releases showed declines in orders and shipments of certain business equipment, weakness in the job market, and a slide in home buying.

Treasury 10-year yields fell four basis points to 4.29%. A $44 billion sale of seven-year notes saw solid demand. Swap markets are pricing in about 45 basis points of easing in 2024, which would equate to less than two cuts.

The S&P 500 fluctuated around 5,480. NVIDIA dropped as Micron Technology forecast failed to meet lofty expectations. Walgreens Boots Alliance tumbled 22% after slashing its guidance. Chewy and Petco Health and Wellness whipsawed as Keith Gill, known as “Roaring Kitty”, posted a cartoon image of a dog on X.

Fed’s Bostic said he continues to expect one rate reduction this year amid signs that inflation has resumed its decline. His projection echoes that of the Federal Open Market Committee. Earlier this month, Fed officials pencilled in just one rate reduction for 2024, according to the median forecast.