Inside Markets

The logic behind pricing in a March rate cut originally came from Fed officials’ repeated emphasis on the annualized 6-month run rate core PCE.

This week’s ramp in CQ4 earnings season will be a test for the momentum-driven rally.

Yesterday’s updated Summary of Economic Projections (SEP) clearly supports market expectations for a soft landing, especially when compared to the SEP from last December.

The updated dot plot will likely attract the most attention when the Fed releases its Summary of Economic Projections later this morning.

Market-based probability for a March rate cut has declined to 44% into tomorrow’s Fed meeting from 65% last week.

Consensus is looking for headline CPI of 0.0% MoM and 3.1% YoY. A MoM headline CPI print of +0.1% wouldn’t change the YoY estimate for +3.1%.  This probably means the risks are skewed to the upside with a sub-3% YoY rate resulting in lower bond

Ten-year bond yields have started a short-term mean reversion trade with the benchmark rate lifting from key support levels.

Labor market data should become a bigger input for Fed policy expectations going forward.

The year-end momentum reversal usually results in Eurozone indices outperforming US benchmarks.

The positive correlation between stocks and bonds breaks down today as yields move lower for the ‘wrong reasons.’