May 6, 2025

QuickTakes

A Seinfeld Kinda Day:

Nothing Really Happened

Not much happened today in either the stock market or the bond market. Dull days are good for a change. The markets are no longer responding to every comment coming out of the White House. On Sunday, President Donald Trump called Fed Chair Jerome Powell "a total stiff." But he also said that he will not remove the Fed Chair. Today, Treasury Secretary Scott Bessent observed, "The United States is the premier destination for international capital." The dollar index (DXY) edged up slightly. On the other hand, the price of gold jumped sharply higher to $3386.60 this evening (chart).

The Fed released last week's daily readings for the "broad" trade-weighted dollar. It hasn't been as weak as DXY, which is a fixed-weight currency index with the euro having a weight of 57.6% (chart)!

Not to dismiss the recession debate that seems everywhere you turn these days, but it's beginning to give off a "yadda-yadda-yadda" energy. Chatter about a tariff-driven downturn often seems at odds with the data and market dynamics. Case in point: the yield curve is ascending (chart). That doesn't tend to happen before an economy slides into the red.

No one's saying that the ISM nonmanufacturing PMI increasing to 51.6 in April was a showstopper (chart). But the series moving further away from 50, and upward, offers its own cliffhanger for data in the days ahead. At the very least, it's a stay-tuned signal that all's not as dire as many fear.

The April jobs data thickened the plot. No doubt, the nonmanufacturing PMI employment index coming in weak for three straight months bears watching. But actual payroll employment among private-sector service-providing industries suggests key parts of the economy are holding up.

On the other hand, signs of slowing activity in services GDP, which fit with NM-PMI trends, make for something of a split-screen for the time being. More data are needed to see how the story ends.

Recent PMI data on prices also fit with the storyline that the evidence of tariff-driven inflation appears more compelling than hints of a sharp economic downturn. Again, stay tuned.

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