US Economy and Credit Markets Ended May5, 2017

Bob Carey
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US Economy and Credit Markets Ended May5, 2017

Posted Under: Weekly Market Commentary

Treasuries fell during a busy week highlighted by the Federal Open Market Committee meeting and the April jobs report. On Wednesday, the FOMC decided to keep its target range for the federal funds rate unchanged, which was widely expected. However, the FOMC's comments reaffirmed that it would likely raise rates in June. Treasuries fell following the meeting as investors sold bonds in anticipation of higher rates. Following the selloff on Wednesday and Thursday, Treasuries steadied on Friday as a stronger-than-expected April jobs report further pointed to a Fed rate hike in June. Specifically, the Labor Department said that total nonfarm payroll employment increased by 211,000 jobs in April. Also, the unemployment rate dropped to 4.4%, a rate that has not been seen since May 2007. Despite the strong jobs numbers, average hourly earnings grew 2.5% compared to last year, which was the smallest gain since August 2016. However, a tight labor market could lead to higher wage inflation. Going forward, bond investors will likely watch for changes in fiscal policy and its effect on growth and inflation. A tax cut would likely lead to higher inflation and tighter monetary policy. The results of the French presidential election will also be watched by bond investors. Major economic reports (related consensus forecasts; prior data) for the upcoming week include Tuesday: March Wholesale Inventories (-0.1%, -0.1%); Wednesday: May MBA Mortgage Applications (flat, -0.1%); Thursday: May Initial Jobless Claims (245K, 238K), April PPI Final Demand (0.2%, -0.1%); Friday: April CPI (0.2%,-0.3%), May University of Michigan Sentiment (97M, 97M), April Retail Sales Advance (0.6%, -0.2%).

Posted on Monday, May 8, 2017 @ 9:35 AM • Post Link	Share:
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These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.

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