Show us the jobs, Federal Reserve says, before any interest rate increase

We want to see the job gains before we remove any support for the economy, Federal Reserve Chairman Jerome Powell said at an event at the International Monetary Fund, on Thursday, April 8. Putting another marker in the ground on when the central bank might start to cut back on its schedule to purchase $120 billion a month in Treasuries and mortgage-backed securities–and then to raise its benchmark interest rate, Powell said the Fed wants to see a string of months like March when the economy added 916,000 jobs.

New claims for unemployment up again this week

New claims for unemployment up again this week

Initial claims for unemployment in regular state programs rose by 16,000 to 744,000 in the week ended April 3, the Labor Department reported today, April 8. This was the second straight weekly increase in new claims. For the prior week, the total new claims figure was revised upward to 728,000. Economists surveyed by Bloomberg had projected that initial claims for the week would fall to 680,000.

Nothing in the Federal Reserve minutes released today to pause financial markets.

Nothing in the Federal Reserve minutes released today to pause financial markets.

Nothing to see here. Move along. In the minutes from its March 16-17 meeting, released today April 7, Federal Reserve officials told the financial markets “that it would likely be some time until substantial further progress toward the [Open Market] Committee’s maximum-employment and price-stability goals would be realized.” And, the minutes went on, “a number of participants highlighted the importance of the Committee clearly communicating its assessment of progress toward its longer-run goals well in advance of the time when it could be judged substantial enough to warrant a change in the pace of asset purchases.”

Can the Fed win on Wednesday against market sentiment?

Can the Fed win on Wednesday against market sentiment?

On Wednesday the Federal Reserve will update its projections for GDP growth, inflation, and the timing of any interest rate increase. In December, Fed officials, on the famous (or infamous) dot plot indicated that that central bank officials expected to hold benchmark interest rates in the current 0% to 0.25% range through the end of 2023. in the months since that projection from the Fed the market has been pricing in a different scenario, one that sees a tightening in interest rates from the Fed at the end of 2022. In other words roughly a year earlier than the Fed’s projected schedule last December.

I almost forgot…the Federal Reserve meets on Wednesday

I almost forgot…the Federal Reserve meets on Wednesday

With everything going on, it’s easy to forget about the upcoming meeting of the Federal Reserve’s interest rate setting body, the Open Market Committee, on Wednesday. Which would be a mistake because, in my opinion, nothing is more important than interest rates (and bond yields) for the direction of stocks over the next four months or so. The Fed isn’t expected to announce any change in policy on Wednesday. Benchmark interest rates will stay at 0% to 0.25%. The central bank is almost certain to keep buying $120 billion a month in Treasuries and mortgage-backed securities But this meeting in scheduled to include an update on the Fed’s projections for future inflation and economic growth. Those words have the potential to shift the market ahead of any action.

Nothing in the Federal Reserve minutes released today to pause financial markets.

Saturday Night Quarterback says (on a Sunday), For the week ahead expect…

The odds are that the bond market will snap back this week as traders decide that the drop in the price of the 10-year Treasury (and the climb in yield) has been too far and too fast. (A drop in Treasury yields would be likely to send stocks higher, reversing the trend of the last week.)I don’t think that reverses the trend beyond a week’s bounce, however. The $1.9 trillion coronavirus stimulus/relief bill still scares the bond market with the possibility of an uptick in inflation (finally) and the possibility that the package migh work and actually put the economy on the path to a sustained recovery. (And why might that be a bad thing, you ask: Because a clearly sustained recovery would incline the Federal Reserve to end, or at least scale back, its monthly purchase of $120 billion in Treasuries and mortgage-backed securities.)On Friday the yield on the 10-year Treasury fell to 1.40% as bond prices rose. That was an 11 basis point drop on the day and it could well be a harbinger of a bounce for Treasuries this coming week.

Can the Fed win on Wednesday against market sentiment?

10-year Treasury yield hits 1.61%–bond market moves now driving stock prices

Yields on U.S. Treasuries hit 1.61% early today before pulling back slightly to 1.51% as of 3 p.m. New York time. It’s not just the rise in yields or even the magnitude of the increase that has so disconcerted the bond market today, February 25. It’s the speed of the move. As of 3 p.m., the bond market was looking at a 14 basis point increase in yields just today. That’s a huge move for the normally slow-moving bond market.