The tough economic growth of the first quarter challenges the Fed at its meeting next week

Treasury yields first climbed in the GDP report, as investors sold, but the fact that inflation seemed weaker and the transient factors related to stocks and trade boosted growth to some extent. unenthusiastic Bonds quickly reversed and prices were offered upwards. Yields, which changed the opposite price, fell, falling by 2.26% over 2 years.

"The accumulation of inventories and net exports contributed about 1.7% – these are decisive factors – it will not happen again in the second quarter – I guess it hurts a bit or makes no contribution. " [in Q2]Said Ward McCarthy, chief financial economist at Jefferies. Economists say that the accumulation of stocks can be followed by withdrawal periods, which could have a negative impact on growth.

But economists said the consumer was strengthening, as evidenced by the 1.6% jump in retail sales in March, which is expected to continue and push up GDP in the second quarter, but not at the same pace as the first one. quarter. The first quarter thwarted initial forecasts of near stable growth, based on winter weather data from the government shutdown and bad weather.

"So much for perpetual pessimism, you've made a lot of contributions, the consumer has only contributed 0.8% to growth, and consumer spending is on the rise in the second quarter," he said. So is a good thing, "McCarthy said.

As for the Fed, some market professionals are worried about what Powell might say, as the Fed's surprisingly accommodative stance in January and March helped trigger a stock rally that brought the S & P 500 and the Nasdaq to new heights. Shares were down on Friday after ExxonMobil and Intel posted disappointing results.

"They are in patient mode – I'm sure at least many of them are surprised – perpetual pessimism has contributed to the 180-degree pivot they've created," McCarthy said. "I'm sure this will heat up the internal debate about where the policy should go."

Mark Cabana, head of US short-rate strategy at Bank of America Merrill Lynch, said there was a risk that the market would expect too much transparency from the Fed chairman.

"I do not think the Fed will announce a major change in next week's policy, it will simply explain how the economy is showing signs of improvement and that it is therefore appropriate to stay patient and see how things are changing. " "said Cabana.

Rupkey said the economy was on track for growth above 2% for the rest of the year, after investors feared a recession and that some bond market professionals would be positioned for lower growth. The bond market talks this week focused on the lack of inflation and therefore gave no reason for the Fed to do more hawks.

"This can be interpreted differently, whether your glbad is half full or half empty, it's a shock that it's 3% at the end of the day." No matter how many moving parts It's not in the dumps, it's not a recession, we were at 3% … Nothing, but nothing has brought down the economy, "Rupkey said.