28 Feb Big reports released this morning/locking bias
The big report of the week was released this morning, with GDP showing a growth of 2.4% vs. first estimates of 3.2% which were then revised lower to 2.5%. With the actual report missing expectations on such an important report, you would expect the bond market to react positively and the stock market negatively. However, just the opposite is happening. In fact, the S&P 500 is currently sitting at a new all-time high of 1866! This contradictory response is becoming common, as often times the markets seem to trade more heavily based on technical vs. responding to economic reports.
Chicago Purchasing Manager’s Index, which is a forward looking number on what is being purchased, came in this morning 59.8 which indicates a growing economy. Also, Consumer Sentiment for February was reported at 81.6, a bit stronger than expectations of 81.5 and higher than last month’s reading of 81.2. Both of these reports added additional pressure to the bond market while helping to boost stocks.
Bonds are again at a critical point. With stocks appearing poised to set new closing highs today, bonds will be pressured lower. In light of all that is happening, we are going to suggest a locking bias today. We have to be careful next week. If stocks keep moving higher, as the charts are suggesting will be likely, this will likely continue to pressure interest rates higher.