Morning Report: The FOMC statement soothes markets 4/28/16

Stocks are lower this morning after the Bank of Japan declined to add further stimulus measures to the economy. Bonds and MBS are down.

First quarter GDP came in at 0.5%, lower than expected. Consumption and the core price index both rose. This is the advance estimate, so it will be revised twice over the next two months. Positive contributors to GDP included personal consumption, residential fixed investment, and state / local government spending. Negative contributors include inventory, non-residential fixed investment, and federal government spending. This is the lowest quarterly print in 2 years, although weakness in the oil patch does explain a good chunk of it.

The Fed maintained interest rates yesterday, and made few changes to the language of the FOMC statement. The most substantive change was that they removed the language regarding weakness in global financial markets. They noted the US economy slowed recently however the labor market continues to improve. Housing and capital expenditures continue to remain soft.  After a few headfakes immediately after the release, the bond market finally decided that the statement was good news and rallied a couple basis points. Stocks took the “glass half full” view and rallied as well. Here is Mohammed El-Arian’s take on the statement.

Initial Jobless Claims rose to 247k last week. The Bloomberg Consumer Comfort index rose to 43.4 from 42.9 last week as well. lays out the hottest real estate markets this month. The West Coast and the Rust Belt lead the pack. Has the Rust Belt finally become too cheap to ignore?

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