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Second Round Weak PMIs Tempers Forward Rate Hike Guidance

US TSYS
Tsys trade higher after the bell -- well off midmorning highs to near middle of the session range.
  • Not much of a reaction after 229k weekly claims, 1.315M continuing claims slightly above estimates, 226k and 1.312M respectively, Tsy ylds continued to ease (30YY slipped to 3.1438% low in the first half) after second consecutive set of weak PMIs:
    • Mfg: 52.4 vs expected 56.0 and last of 57.0
    • Services: 51.6 vs expected 53.3 and last of 53.4
    • Comp: 51.2 vs expected 53.0 and last of 53.6
  • Meanwhile, Fed speakers bang on about another 75bp hike in July (Fed Gov Bowman, w/ additional 50bp hikes by year end) -- a temporary silver lining for stocks as the economic slow-down (still not good news) quells further rate hike pricing by year end. Indeed, markets started to price in rate cuts by early-mid 2023.
  • SPX eminis futures ESU2 currently +19.5 (0.41%) at 3782.25 vs. 3797.25 high. DJIA +29.11 (0.1%) at 30509.55; Nasdaq +109.4 (1%) at 11162.19.
  • Eurodollar futures anticipated repricing earlier: near term recession expectations remain as futures inversion crept forward: Dec'22 currently trading 96.24 vs. Mar'23 at 96.28, w/ EDH3/EDH4 at -48.5. Interpretation: Since Wed's Senate testimony from Fed Chair Powell, futures pricing END of rate hikes has migrated from mid-2023 to end of this year. Pricing fluid as markets contend with ongoing slowdown.
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