Market leans Dovish on Fed Chair's Comments // Market Wrap 19 Oct

Fed Chair Comments on the Economic Outlook can be summarized through the table below. The comments are in line with Fed Speak from earlier in the week. Nothing new there. WSJ is running a headline "Fed’s Jerome Powell Signals Extended Pause in Interest Rate Rises". 

Market leaned on the dovish side following the comments. Fed Fund implied pricing shifted downwards.

Jan 31, 2024 5.43% (prior 5.46%)
Jun 12, 2024 5.18% (prior 5.25%, 1 cut by mid next year)
Dec 18, 2024 4.74% (prior 4.82%, 64 bps of cut from peak terminal rates)

US2s10s bear steepened with the spread now tighter at -17 bps from previous -31 bps with the front end of the curve outperforming the back end of the curve. US2s peaked at 5.26% before closing the day at 5.16% thus giving a one day reversal candle and US10s peaked at 4.996% before closing the day at 4.92%. 

Crude oil prices and Gold continued to climb closing the session at $ 93.35 and $ 1974.

On the data front, Initial Jobless Claims data w/e Oct 14, decreased by 13000 to sub 200,000 number (198,000). That's the first reading since Jan when the data is below 200K and the continuing jobless claims rose by 29000 to 1.734 mn. 

Source: Zerohedge Goldman reminds us that ongoing seasonal distortions have increasingly weighed on the level of continuing claims over the last six months, and we now expect that the reversal of those distortions could exert a cumulative boost of 375k to the level of continuing claims between now and March. 

Existing home sales decreased 2.0% mom, down 15.4% yoy as higher mortgage rates affect affordability and locked in lower mortgage rates disincline homeowners to sell existing units.