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US 10-year Treasury yields are down in 9 of the past 11 days as fears about economic weakness percolate. Those really kicked off after a series of soft consumer and business sentiment reports. Yesterday jobless claims jumped and today there was more fuel today with brutal drop in the Atlanta Fed GDPNow tracker.

That’s left 10s at 4.23% from a high of 4.66% on Feb 12 and 4.80% in mid-January. Critically, that has 10-year yields now below the bottom end of the Fed’s 4.25-4.50% range and 3-month t-bill rates at 4.30%. That’s an inversion of the yield curve which is a classic front-runner of a recession.

That said, classic hasn’t seemed to apply lately as the curve inverted from 2022 until late last year and we’re still waiting for the recession.

h/t @Econ_Parker

This article was written by Adam Button at www.forexlive.com.

The market has been fretting about slowing growth and it just got some fresh ammo.

The Atlanta Fed Q1 GDP tracker has plunged to -1.5% from +2.3% in one of the steepest declines the index has ever seen.

“After recent releases from the US Bureau of Economic Analysis and the US Census Bureau, the nowcast of the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points while the nowcast of first-quarter real personal consumption expenditures growth fell from 2.3 percent to 1.3 percent,” the latest update said.

I’d caution that it’s still very early in the quarterly data cycle.

Today’s trade data number was particularly soft. That’s most a reflection of today’s poor trade balance data. The deficit rose to 153B from $122B and virtually all of the jump was in imports.

I’m confident that’s due to front-running of tariffs and inventory stockpiling.

However there is also a drag from consumption, which highlights some of the uncertainty. A downside risk is from residential investment, which is looking dismal after guidance from Home Depot and the latest pending home sales number (which hit a record low).

This article was written by Adam Button at www.forexlive.com.

Canada’s fiscal year-to-date budget deficit stands at $21.72B versus $22.72B a year ago. In December there was a surplus of $1 billion compared to a deficit of $4.71B a year ago.

Timing shifts around the number of pay periods in a month make it hard to compare as November produced a particularly large deficit. For the year though, the numbers are stable. That said, the government introduced a two-month HST (sales tax) holiday in mid-December that’s expected to cost just under $2 billion and should show up soon.

Overall, Canada is in surprisingly good fiscal shape at the federal level, leaving an incoming government with room to manoeuvre.

This article was written by Adam Button at www.forexlive.com.

This is a bit of a strange move in the stock market as equities catch a big bid. The S&P 500 is up 34 points after opening lower. To be fair, in the context of the rout yesterday, it’s a small bounce but it came a bit out of left field.

Some of that could be month-end flows or short-covering after a dive in Mag7 stocks. Nvidia is now up 2% after trading 2% lower in the pre-market.

I tend to think it’s something idiosyncratic rather than a larger change in part because bonds and FX have stayed largely stable through the move. US 2-year yields are almost exactly where they were when the market opened and the whole curve is 2-4 bps lower today.

In FX, the loonie is making something of a comeback but in general the dollar is strengthening at the momement, which is the opposite of what you would expect in a ‘risk on’ rally. Cable tried the upside but has been pulled right back into the daily range.

On asset that is playing along is bitcoin, which has bounced nicely to $84K after falling below $80K briefly in Asia.

This article was written by Adam Button at www.forexlive.com.

Friday’s have been rough so far this year.

I suspect that’s because of the risks around some kind of tumultuous Trump announcement on the weekend. So far, today is looking a bit better with S&P 500 futures up 9 points.

That said, yesterday futures were up 30 points in the pre-market and the index finished the day down nearly 100.

Eyes are on Nvidia, which is trading at $117, down 2%. It was at $136 at the open yesterday before getting flushed.

The gains since the US election in the S&P 500 are virtually gone.

This article was written by Adam Button at www.forexlive.com.

Core PCE (excluding food & energy):

• Prior was +2.8%
• Core m/m +0.3% vs +0.3% exp
• Unrounded core PCE +0.285% vs +0.156% m/m prior (unrounded exp +0.27%)
• PCE excluding food, energy and housing +0.3% m/m vs +0.2% m/m prior

Headline PCE

• Headline PCE +2.5% y/y vs +2.5% expected
• Deflator +0.3% m/m vs +0.3% expected
• Unrounded headline +0.325% vs +0.2557% m/m prior (unrounded exp +0.31%)

Consumer spending and income for January:

• Personal income +0.9% vs +0.3% expected. Prior month +0.4%
• Personal spending -0.2% vs +0.1% expected. Prior month +0.7%(revised to +0.8%)
• Real personal spending -0.5% vs +0.4% prior (revised to +0.5%)
• Savings rate 4.6% vs 3.8% prior

These numbers are largely in-line unless you want to split hairs on the unrounded figures. There is some USD selling in the aftermath as it cools fears of a hot number. If you zoom out, core is starting to show an improving trend again.

The other thing that stands out is a nice jump in incomes.

Meanwhile, spending on vehicles took a dive, like due to bad weather. The good news is that should rebound just as strongly whenever it warms up.

This article was written by Adam Button at www.forexlive.com.

• Prior was -0.5% (revised to -0.4%)

Some stockpiling ahead of tariffs?

This article was written by Adam Button at www.forexlive.com.

• Prior month -122.11 billion

This article was written by Greg Michalowski at www.forexlive.com.

• Prior 1.0%
• GDP YoY annualized 2.6% vs 1.8% estimate
• GDP MoM 0.2% versus 0.3% estimate

Household spending up

• Q4 2024 Household Spending: +1.4%, strongest growth since Q2 2022.
• Key Q4 Drivers: New trucks, vans, SUVs; financial services; telecom services.
• 2024 vs. 2023 Household Spending: +2.4% (Goods: +1.6%, Services: +3.0%).
• Top 2024 Contributors: New vehicles, rent, telecom, financial services.

Residential construction grows at highest since Q1 of 2021

• Per Capita Spending: +1.0% in Q4 2024, -0.6% for full year 2024.
• Q4 2024 Residential Construction: +3.9%, strongest since Q1 2021.
• Key Q4 Drivers: Ownership transfer costs (+12.5%), new construction (+2.2%), alterations/improvements (+1.5%).
• Mortgage Growth: +1.3% in Q4, strongest quarter of the year.
• 2024 Annual Residential Construction: -1.1% (vs. -8.5% in 2023).
• Annual Breakdown: Ownership transfer costs +2.8%, alterations/improvements -4.7%, new construction +0.1%.

Business investment rises

• Q4 2024 Business Investment: +0.7%, led by building construction (+1.6%).
• Machinery & Equipment Investment: +4.2%, driven by industrial machinery, aircraft, and transportation equipment.
• Intellectual Property Investment: +0.6%, mainly from custom and own-account software.
• 2024 Annual Business Investment: -1.8%, led by building construction (-3.4%).
• Engineering Structures: -1.1%, impacted by Trans Mountain Expansion Project completion.
• Machinery & Equipment: -2.1% in 2024.
• Intellectual Property: -0.1% (Software +1.3%, R&D -2.3%, Mineral Exploration -4.2%).

This article was written by Greg Michalowski at www.forexlive.com.

The market has been steadily pricing in more Fed cuts this year on creeping economic weakness but it’s unclear if the Fed will have the ability to cut rates given stubborn inflation (pricing is currently at 61.5 bps for this year).

Today’s PCE report will offer up some important evidence on that front. The CPI report for January was hot but the details of the PPI report suggested that PCE inflation wouldn’t be so bad. The consensus on core is +0.3% but for those who forecast to two digits it’s +0.27% which will put the y/y reading at +2.6%. Headline is forecast at +0.31% and +2.5% y/y.

After GDP yesterday, I’m fearful that some upward revisions to prior data will push up that y/y figure even if the m/m number is low.

North of the border, Canadian GDP is due and expected at +1.8% q/q annualized in Q4. Momentum in December will be watched closely with +0.3% expected.

This article was written by Adam Button at www.forexlive.com.

• Prior +2.3%
• CPI +0.4% vs +0.4% m/m expected
• Prior -0.2%
• HICP +2.8% vs +2.7% y/y expected
• Prior +2.8%
• HICP +0.6% vs +0.5% m/m expected
• Prior -0.2%

The report is very much in line with expectations following the state readings earlier here. It is still keeping above 2% but there is some good news at least. Core annual inflation is estimated to be at 2.6% in February, down from the 2.9% reading in January and after the pick up to 3.3% at the end of last year.

This article was written by Justin Low at www.forexlive.com.

• Prior +2.3%
• CPI +0.4% vs +0.4% m/m expected
• Prior -0.2%
• HICP +2.8% vs +2.7% y/y expected
• Prior +2.8%
• HICP +0.6% vs +0.5% m/m expected
• Prior -0.2%

The report is very much in line with expectations following the state readings earlier here. It is still keeping above 2% but there is some good news at least. Core annual inflation is estimated to be at 2.6% in February, down from the 2.9% reading in January and after the pick up to 3.3% at the end of last year.

This article was written by Justin Low at www.forexlive.com.