GOOD MORNING! There was a lot of bad news in the marketplace on Turnaround Tuesday. The International Monetary Fund cut its US and global economic forecasts, warning that tariffs were ushering in a new era of slower growth. The Philadelphia Fed Non-Manufacturing Index and the Richmond Fed Manufacturing Index fell further into contraction territory than was anticipated. The 2-year T-note auction was weak amid ongoing market turmoil and a shift away from US assets by foreign accounts. The auction results, with 5 and 7-year auctions still to come, weighed on that sector of the yield curve. The curve flattened as yields on longer maturities outperformed, reversing the steepening trend in recent trading sessions. In spite of all the bad news, the benchmark equity indices posted sizeable gains. Behind the jump in stocks were reports that Treasury Secretary Bessent said the tariff war with China is unsustainable and he expects the situation will de-escalate, although negotiations have not begun.
     Headline roulette played a role in yesterday’s market performance and appears to playing a role in the markets in early trading. The latest headlines has President Trump saying he has no intention of firing Jerome Powell as Chair of the Federal Reserve and the President suggested that tariffs on China may be substantially cut if a deal is reached. Stock index futures are well into the green while the Treasury curve is mixed and flatter. There is another parade of Fed speakers today along with some economic releases and more Treasury supply. The economic report generator will be churning out the latest weekly mortgage applications, the preliminary S&P Global service, manufacturing and composite PMIs, March’s new home sales and the Fed will release the Beige Book in the early afternoon. On the supply side are auctions for $60 billion 17-week T-bill, $30 billion 2-year Floating Rate Note (FRN) and $70 billion 5-year T-note. Stay buckled up.