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US Close: Stocks lower post hot PPI report and hawkish Fed speak, Fed’s Mester saw case for 50 bp rise, Oil edges higher, Gold rebounds after six-week low, Bitcoin rises



Stocks fell due to a hot PPI report, and an unexpected drop in initial jobless claims. Investors began to expect more Fed tightening. This week was a shock to the disinflation process. Most data suggests that the economy is much stronger than Wall Street expected.  Manufacturing and housing are still in a recession, but the rest of the economy isn’t looking too bad. 

The Fed’s Loretta Mester also helped send Treasury yields higher after saying she saw a ‘compelling’ case for a half-point rate rise at the last FOMC meeting.  Hot PPI data, hawkish Fed talk and hot PPI data helped to push the 10-year Treasury yield up to its highest point this year. 


Fed’s Mester sees inflation reaching 2% in 2025, which signals they have a lot more work to do to bring inflation down.  Mester made a strong case for a half point rate increase at their last meeting. This means that the market shouldn’t expect the Fed not to keep the Fed on cruise control with quarter-point hikes.  Her repeated assertion that rates must rise above 5% for some time and keep them there is now the consensus view. It should be clear that March’s dot plots will be significantly higher.  While she isn’t a vote-taker, her comments suggest that they could do more given…

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