Market Brief – Friday 6/26/20

Treasury yields led stocks lower in overnight and early trading as 30-year Treasury yields broke through a key support level at 1.4%.

Personal Consumption Expenditures (PCE), the value of goods and services purchased by or on behalf of U.S. residents, also known as the Fed’s preferred inflation gauge, rose +0.1% in May and slowed to +0.5% from this time last year. Excluding food and energy, Core PCE rose +0.1% in May and was flat at +1.0% from this time last year.

Personal incomes fell -4.2% and personal spending rose +8.2% in May. Inflation-adjusted consumption rose +8.1% in May.

The University of Michigan Consumer Sentiment Survey rose to 78.1, current conditions rose to 87.1, and consumer expectations rose to 72.3 in June showing consumers are more optimistic about the economy and their future than last month. Inflation expectations fell to +3.0% and 5-year inflation expectations fell to 2.50%.

Stocks fell as a wave of selling hit the market due to a rally in Treasury bonds. The S&P 500 closed below its 200-day moving average, as the market has been flat for the past nine months. Treasury Bond yields broke through their key support level causing yields to fall across the curve, with 30-year Treasury yields closing below their 50-day moving average for the first time since May, suggesting yields are headed much lower.