US Economy and Credit Markets Ended May 4, 2018

U.S. Treasuries exhibited weakness last week, especially short dated maturities, amid strong economic data, rising energy prices, larger debt auctions and a Federal Reserve meeting which saw rates left alone. While Wednesday's Federal Reserve meeting saw rates left unchanged, the future implied probabilities are pricing in a nearly 75% chance for an increase in June. Including the June raise, implied probabilities suggest a total of two more raises in 2018 but are still allowing a 37% chance for three raises. Oil closed near $70/barrel as Venezuela production is in freefall. Because of this, OPEC is exceeding its promised production cuts amid strong global demand outstripping continued strong production from the American Permian basin. On Monday, personal income was seen increasing .3% in March, led by rising wages and an increase in social security benefits, and is up 3.7% from a year before. On Thursday, the trade deficit came in at $49 billion for March and was $4.2 billion larger than the prior year. Friday morning pre-market news showed nonfarm payrolls increasing 164K in April. While this fell short of expectations, the U.S. labor market continues to improve. Major economic reports (related consensus forecasts, prior data) for the upcoming week include: Wednesday: May 4 MBA Mortgage Applications (N/A, -2.5%), April CPI final Demand (0.2%, 0.3%) and March final Wholesale Inventories (0.6%, 0.5%) Thursday: May 5 Initial Jobless Claims (219K, 211K); Friday: May preliminary University of Michigan Sentiment (98.4, 98.8
Posted on Monday, May 7, 2018 @ 8:29 AM

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.