April 30 - Stocks fell notably on this morning's GDP data, but then they firmed off those lows when the PCE inflation data was released. The VIX is trading near 26 at this hour, as the dollar index trades near 99.4. Yields on 10-year Treasuries are trading near 4.17%, while yields in 2-year Treasuries are trading near 3.63%. Crude oil prices are hovering near $58 per barrel, while the grain and oilseed markets are mixed, with corn and wheat prices trying to bounce following yesterday's selloff, while soybeans remain weak on soft demand. Yesterday's big price break spurred some buying interest today for corn and wheat, with the price break spurring a pop in basis. Yet, soybeans lack such a story as South America harvests a big crop, China talks tough on trade, and the EPA still has not updated its RVO requirements that would presumably support domestic demand. USDA estimates Chinese surplus soybean stocks at 44 mmt - nearly 2X what it bought from us this year.
Personal income rose by 0.5% month-on-month in March, beating analyst estimates of 0.4% growth, but down from the 0.7% growth seen in February. Personal consumption expenditures rose by 0.7% on the month in March, beating expectations of 0.5%, and up from the 0.5% growth seen in February. This fits with the trend we saw in this morning's gross domestic product report that showed growth in consumer buying in the first quarter of this year - likely as consumers tried to get products before the reciprocal tariffs went into effect.
The PCE price index - the Federal Reserve's favorite inflation indicator - was flat in March, indicating no headline inflation during the month. That matched expectations, while also being a sharp improvement from the upwardly revised 0.4% monthly inflation rate seen in February. The PCE price index rose 2.3% year-on-year in March, up from analyst expectations of 2.2%, but down from the upwardly revised 2.7% posted for February. The core PCE price index that excludes the more volatile food and energy sectors was also flat in March, down from analyst expectations of 0.1% inflation, and down from an upwardly revised 0.5% in February. The core PCE price index was up 2.6% year-on-year in March, matching analyst expectations, but down from an upwardly revised 3.0% in February. The headlines continue to scare consumers with talk of inflation, and that may come at some point. But for now, we're seeing more evidence of declining inflation in the hard data, which is what the market has actually been trading in recent weeks, based on the 5-year breakeven inflation rate.
The pending home sales index rose 6.1% to 76.5 in March, exceeding analyst expectations of a 1% rise, and better than the 2.1% rise seen in February. This index measures contract signings, although that's not a guarantee of actual closings. Yet, it does indicate that home buyers are becoming quite sensitive to relatively small dips in mortgage rates to make purchases. The northeast saw declines in transactions in March, while other areas saw gains, led by the South. This again is a positive sign for the economy, although the April data might show something quite different, based on the uncertainty that came out of the tariff battle unfolding during the month.
Commercial crude oil stocks (excluding the Strategic Petroleum Reserve) fell 2.7 million to 440.4 million barrels in the week ending April 25, putting them 6% below levels typically seen in late April. Gasoline stocks dropped by 4 million barrels, putting them 4% below the five-year average for the week. Distillate stocks rose by 0.9 million barrels, leaving them still 13% below seasonal levels. Ethanol stocks slipped to 25.4 million barrels last week, down from 25.5 million both the previous week and the previous year. Ethanol production rose to 1,040K barrels per day in the week ending April 25, up from 1,033K bpd the previous week, and up from 987K bpd the previous year. Estimated corn use for ethanol totaled 100.9 million bushels last week, up from 100.3 million bushels the previous week, and up from 98.1 million bushels in the same week last year.
