1. The Supreme Court ruled 6–3 that President Trump exceeded his authority in imposing sweeping global tariffs under emergency powers without clear congressional authorization.

2. President Trump says he will impose a different 10% tariff and that questions about tariff refunds will be decided in court

• Treasury yields rose, led by the long end.

3. Q4 real GDP growth came in at 1.4%, well below the 3.0% consensus, suppressed by a significant drag from the record-long federal shutdown.

– This chart compares the contribution of each component to the trailing one-year and ten-year averages. Notably, personal consumption and business investment remained solid.

– Stripping out net exports, inventories, and government spending, real final sales to private domestic purchasers still saw robust expansion.

– AI-related contributions, proxied by information processing equipment, software, and intellectual property, moderated further.

• Looking beyond Q4, the Atlanta Fed’s initial Q1 GDPNow reading is 3.1%.

4. Personal income growth matched expectations.

– Here are the year-over-year income growth rates by source.

– Real disposable income growth has moderated meaningfully.

• Nominal personal spending was stable and matched consensus, but real spending softened.

– Improved spending on services was offset by weakness in goods spending.

• Weak real income gains and an unsustainably low savings rate are likely to limit further support for household spending.

5. The Fed’s preferred inflation gauge, the core PCE price index, rose by more than expected, driven by faster goods inflation, reflecting tariff pass-through and higher software prices, and a sharp rise in recreation services.

• Here’s annualized core PCE inflation accelerating across different trailing periods.

• The next set of charts shows our aggregation of major core PCE drivers.