Another morning, another set of economic reports with the power to move markets. Today’s examples included jobless claims coming in at 228 vs 235k, core PCE inflation hitting its target at 0.2% month over month, and Chicago PMI at 48.7 versus a forecast of 44.1. Notably, despite PCE being on target, some internal components remain troubling. Core services inflation has been moving UP over the past few months.
Same chart in year-over-year terms. Both lines remain well above target levels and there’s been little–if any–progress in core services.
How about Claims data? Simply put, 228k NOT consistent with labor market slack.
In other words, the “decency” of this data is debatable, but bonds are rallying modestly nonetheless. The only obvious way to reconcile the mismatched reaction would be to point out the extra weakness in shorter-term yields. Perhaps there’s some fear about being on the wrong side of the trade for tomorrow’s NFP, or perhaps month-end trading constraints are keeping things a bit better bid.