Morning Report: More hawkish Fed-Speak this morning

Vital Statistics:

Stocks are flattish this morning as retail earnings come in. Bonds and MBS are down.

Bonds are down this morning after Dallas Fed President Lorie Logan said that inflation is still too high to consider pausing rate hikes. “The data in coming weeks could yet show that it is appropriate to skip a meeting,” Logan said in remarks prepared for delivery to the Texas Bankers Association in San Antonio, referring to the Fed’s twice-quarterly policy-setting meetings, the next of which takes place June 13-14. “As of today, though, we aren’t there yet.” The June Fed Funds futures are now handicapping a 37% chance of another 25 basis point hike at the June meeting.

The debt ceiling issue isn’t helping either, but for the most part it is nothing more than kabuki theater. The debt ceiling always gets raised, and if it doesn’t the government “shuts down” which usually means they close down the parks in Washington DC and not much else. Principal and interest on the debt still gets paid. FWIW, it looks like both sides are inching towards a deal.

WalMart reported strong comp sales this morning, bucking the trend seen by Home Depot and Target. It looks like WalMart is a beneficiary of inflation, as shoppers eschew more expensive stores and bargain-hunt.

Existing home sales fell 3.4% in April, according to NAR. On a YOY basis, sales were down 23.2%. The median home price fell 1.7% compared to a year ago. “Roughly half of the country is experiencing price gains,” Yun noted. “Even in markets with lower prices, primarily the expensive West region, multiple-offer situations have returned in the spring buying season following the calmer winter market. Distressed and forced property sales are virtually nonexistent.” Inventory rose 7% MOM and 1% YOY.

In other economic news, initial jobless claims fell to 242k, while the Philly Fed Index improved, while remaining negative. The Philly Fed index showed that price inflation dropped to the lowest level since mid-2020. The prices received index declined for the third month in a row and hit -3.3, which means more companies are reporting decreases in prices received than increases. FWIW, it looks like the prices diffusion index is back to normal.

13 Responses

  1. Mark – nice summation of the current state of the Biden investigations/allegations:


  2. First article that I’ve seen on the debt ceiling that actually has some useful info:

    Looks like the Post article is based on this:

    Worth noting:

    “In 2014, Treasury sent a letter to the House Financial Services Committee stating it is technically capable of prioritizing interest payments.”


    • jnc (from the article):

      Experts say the Treasury may not have the legal authority — or the technical ability — to pick and choose which payments it makes and prioritize some bills over others.

      This is such nonsense reporting. First of all, as you pointed out, the Treasury has already said that it does have the technical ability to prioritize interest payments. Second, saying that they “may not” have the legal authority necessarily implies that they may indeed have it, so it has told us literally nothing other than “we don’t know if they have the legal authority”. And to top it off, they put the stamp of “experts” on this entirely uninformative “we don’t know”.

      Good job, WaPo.


      • BTW, I put the chance that the Treasury doesn’t have legal authority to prioritize payments at zero percent. Even if it doesn’t exist explicitly as a matter of statute, the power to do it is necessarily inherent in its role as the payer of all obligations. It would be an absurdity to hold that, if it can’t make all payments on time, it must not make any payments ever.


        • My own take is that Biden will most likely do what the Bipartisan Policy Center piece explains and that is keep enough money reserved to pay interest and principle on the debt as it comes due which is done through it’s own system apparently based in the NY Fed. Those payments are apparently twice a month on the 15th and the 30th.

          The rest of the payments will be made when sufficient cash is on hand to make a full day’s payment. So they will just fall further and further behind as they go along. This is apparently a lot simpler than picking who to pay and less open to legal challenge.

          So people who should have been paid on June 1 will be paid on June 2, June 2 on June 4th, etc.


      • Well, it’s literally true that the people that the Post cited as experts said that, but rather than interrogate the experts and challenge them to justify the position, they just included it without comment.

        That’s because this is about driving a narrative, not informing the public.


  3. Uggghhhh, this makes me really sad and also frustrated. As a very healthy 73 year old I hope I know when it’s time to retire. We are actually selling everything by the end of the year or early next year and retiring in CO…………….I’ve worked my entire life in many roles and like to think I’ve made a difference in a few high school senior’s lives, hospice patients and families, my children’s upbringing, my church family etc. etc. I’ve also hopefully inspired some women to take control of their health and fitness and campaigned for a better union and some of you may remember my efforts regarding health care.

    Poor Feinstein should have continued to recover at home and simply enjoy her legacy. Walter had Shingles on his face 2 years ago and it was devastating, and he still has nerve damage and pain today and probably for the rest of his life.

    Not sure how you guys do vaccines but as you’re all getting older I seriously suggest you get the Shingles Vaccine, if you haven’t already.

    Feinstein’s frail appearance was a result of several complications after she was hospitalized for shingles in February, some of which she has not publicly disclosed. The shingles spread to her face and neck, causing vision and balance impairments and facial paralysis known as Ramsay Hunt syndrome. The virus also brought on a previously unreported case of encephalitis, a rare but potentially debilitating complication of shingles that a spokesperson confirmed Thursday after The New York Times first revealed it, saying that the condition had “resolved itself” in March.

    This is essentially just a public service announcement!


    • Shingles is bad news for sure. Especially on the face and when it effects the optic nerve.

      If the draw of an elected office is enough to keep someone wanting to work past standard retirement ages then there is far to much power and far to many perks for that office.


    • I got my shingles vaccine last week. Some relatives had it and even without complications it still sucks. I have to get the second dose in six months.

      Minimal side effects. I think I was tired for one day and had soreness at the injection site.


      • I’d say if there’s one virus that I worry about it’s shingles. PHN, shingles pain, is a leading cause of suicide among the elderly and your odds of getting shingles, if you’ve had chicken pox is about 1 in 5.

        The only other thing I really worry about is back trouble, as in, herniated discs. That is also exceedingly debilitating. I am blessedly free of that at 57 but every time I get a back twinge it spooks me a little.

        Also, it is true that once you hit a certain age you and your friends discuss your various illnesses at length and in depth. Also, kids nowadays, God help us. And get the fuck off my lawn!


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