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Major market averages opened up trading higher on Friday with cooler inflation data and personal spending and income data arriving.
The Nasdaq Composite (COMP.IND) was +1% and was the strongest thanks to a post-earnings jump in Intel. The S&P 500 (SP500) was +0.7% and the Dow (DJI) was +0.4%.
After the Fed, economic numbers and earnings, the S&P 500 goes into the last day of trading flat for the jam-packed week. The Nasdaq is up 0.1% and the Dow, after breaking its record streak of 13 up days, is only 0.2% higher.
Rates were lower on the short end after a jump yesterday. The 2-year Treasury yield (US2Y) fell 5 basis points to 4.89% and the 10-year yield (US10Y) fell 3 basis points to 3.97%.
Reports of Japan tweaking yield curve control, confirmed Friday morning, pushed rates up yesterday as “the last international hold out on ultra low yields … turned,” Deutsche Bank’s. Jim Reid noted.
“In a slightly complicated message the BoJ kept their target for 10yr JGBs at 0% but effectively widened the band to +1% from 0.5% even if they’ve kept the original bands as reference points,” Reid said. “It confused me a bit this early in the morning but they won’t be able to defend 0.5% now absent a macro development that structurally lowers yields.”
The yen (USD:JPY) +0.2% is lower against the dollar.
June personal income and spending numbers arrived. June personal income and outlays showed +0.3% M/M compared to the expected +0.4%. At the same time, personal spending came in at +0.5% M/M versus the anticipated +0.1% figure. Moreover, the core PCE price index, the Fed’s favorite inflation gauge came in at +0.2% M/M, in line with expectations and lower than the +0.3% previous read.
“This aggregate picture does not do justice to US economic divergence,” UBS’ Paul Donovan said. “Lower income groups are under more pressure than middle income groups, and some areas like Florida are experiencing lower living standards from localized inflation. Overall, middle income consumers should support spending.”
At the same time the Q2 employment cost index was +1.0% Q/Q versus the expected +1.1% level.
