In 30 seconds: A wave of stronger-than-expected US economic data — including durable goods orders, housing starts, and Q1 earnings beats — points to resilient private investment even as consumer confidence and real adjusted figures show underlying softness. The closure of the Strait of Hormuz following a US-Iran conflict has sent Brent crude above $120/bbl, US gas prices to record highs, and triggered massive inventory drawdowns, reshaping the global energy order. The Federal Reserve held rates steady but saw four dissents — the most since 1992 — with three officials opposing the easing bias and one pushing for a cut, as the Middle East conflict complicates the inflation and growth outlook. Kevin Warsh advanced out of the Senate Banking Committee on a historic 13-11 party-line vote to become the next Fed chair, drawing criticism over his views on the dual mandate and the Fed's 2024 rate cut.
Durable goods orders rose 0.8% month over month, with the ex-transportation reading up 0.9%. US core capital goods orders look very strong at first glance, signaling a renewed wave of capex investment with core orders +1.2% month-over-month in March and core shipments +3.3%, but when you adjust for prices both orders and shipments are LOWER than last year. Over the trailing twelve months, core orders are up 9.4%. That is a lot of capex enthusiasm. The nominal numbers are doing the work that real numbers refuse to do. Housing told a similar split-screen story. March housing starts up 10.8% month-over-month. The February FHFA House Price Index was flat at 0.0% month over month, while the S&P CoreLogic CS National Home Price Index showed a 2.48% three-month annualized gain. Mortgage applications slipped 1.6% week-over-week. Meanwhile, earnings season is doing its thing. Of 137 companies reporting, 79% have beaten estimates by an average of 1,019 basis points. 17 triple plays landed since the prior close. NXP Semi $NXPI jumped 24% on results; Bloom Energy $BE rose 24%; Amphenol $APH tallied its sixth straight triple play with shares up 5.6%. The consumer, though, is less cheerful. The Conference Board Consumer Confidence Index showed the spread between expectations and present situation still deep in negative territory in April, at 51.6 index points. Conference Board Consumer Confidence Index — spread between expectations and present situation: 51.6. Consumers' average 12-month inflation expectations: 6.1%. Factories are ordering. Consumers are worrying. The usual arrangement.
The Strait of Hormuz has now been closed for 2 months, and the inventory math is getting ugly. Global oil stocks have taken a hit of roughly 1 billion barrels, even though the pre-war market was in a structural surplus with inventories high and rising. That cushion is disappearing fast. Dated Brent traded at $123.37 per barrel today, with prompt (June) Brent crude futures at $120 per barrel after surging nearly $9 in a single session. WTI has followed Brent above $100. The inventory drawdowns tell the story at the micro level. Last week, US total petroleum inventories fell at a rate of roughly 3.5 million barrels per day. American total petroleum exports hit 14 million barrels per day last week, an all-time high. At the pump, US gas prices have reached $4.23 per gallon, the highest since August 2022, after climbing 42% over the last 9 weeks — the largest spike over any 9-week window in the past 30 years. The supply side offers limited relief. OPEC's share of global production has slipped from roughly one-half during the first oil shock in 1973 to about a third in 2024. You close one strait and the whole plumbing backs up.
The Fed left interest rates unchanged, keeping the federal funds rate at 3.5-3.75%, but the decision was anything but unanimous. Four officials dissented, the most at a single meeting since 1992. The split ran in both directions. You could call it a hold. You could also call it a committee that agrees on almost nothing except the date of its next meeting. The statement revealed deepening division over the outlook for policy amid increased uncertainty caused by the conflict in the Middle East. This is the diplomatic version of saying the committee has no idea whether the next move is up, down, or sideways, and would prefer not to be asked. Markets did not take the ambiguity well. Treasury yields rose across the curve, with the 2-year climbing 10 basis points to 3.95% and the 10-year rising 6 basis points to 4.41%. 2-year US Treasury yield: 3.95%. For context, the ten-year sat at 3.95% at the end of February. It has not exactly been a quiet few months. The global picture offered no comfort. The Bank of Canada also held its rate at 2.25%. The Fed chair stepped to the podium for his 64th press conference. At this point the format is familiar. The answers, less so.
interest rates (Fed Holds Rates, Four Dissents Signal Deep Division) connects to federal funds rate (Kevin Warsh Clears Senate Committee for Fed Chair) through Fed.
Kevin Warsh, Donald Trump's nominee to be the next Federal Reserve chair, won the backing of the Senate Banking Committee on a 13-11 party-line vote. The tally makes this the first ever party-line vote for a Fed chair out of committee. Until 2020, party-line votes for any Fed nominees were unusual. He received no Democratic support. Warsh has repeatedly derided the Fed's description in 2020 of maximum employment as a 'broad-based and inclusive goal' as 'redefining' the mandate and inviting inflation. Over the past 20 years, the Fed has been building a more rigorous understanding of what maximum employment means and how to pursue it. It's not mission creep, it's the US labor market. Warsh seemed puzzled by the Fed's 50 basis point rate cut in September 2024, called it 'lurching' without rationale and inviting criticism as being political. Senate Banking Committee approved nomination on a 13-11 party-line vote.
Here is what your portfolio did this session.
S&P 500: 7,135.95, down 0.04% on the day
10-Year Treasury yield: 4.42%, up 6 basis points on the day
30-Year Treasury yield: 4.99%, up 4 basis points on the day
13-Week T-Bill yield: 3.59%, unchanged on the day
Gold: $4,566.10, down 0.55% on the day
Long bonds (TLT): $85.70, down 0.78% on the day