Markets will be focused on FOMC and labor data this week

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Published Date 1/29/2024

Rates began lower this morning ahead of a heavy week of key data as well as new comments from the FOMC meeting on Wednesday and employment on Friday. Rates are inching lower, still in the tight trading ranges that have contained rates for two weeks now. Over the weekend three US service people were killed by a drone attack by Iranian-backed militants on a U.S. outpost in Jordan. The tensions are increasing, Biden is being pushed to respond in kind. The middle east is boiling, yet so far US markets haven’t been affected.

The FOMC is believed to signal more about when the Fed may lower rates, Powel’s press conference Wednesday afternoon, always critical but more so this go round. On Thursday, the Bank of England will announce what it is thinking. Employment on Friday. Over the weekend ECB Governing Council member Peter Kazimir, hinting the first rate cut will likely be in June, he isn’t ready to move quickly saying “It could easily derail the progress we have made toward reaching our target.”

There isn’t any data today, any movement will be driven by the response to the Iran backed killing of three US service people.

Treasury will tell us how much it needs to fund the government, last November Treasury increased the refunding needs, on Wednesday look for Treasury to announce it needs more with US debt increasing rapidly. Most attention these days has been on when rates will be reduced by the Fed and other central banks, leading to the forecasts of lower rates. What isn’t being said out loud is Treasury auctions will grow and become a hurdle for those lower rate levels. US debt totals $34 trillion and is increasing every year.

At 9:30 am the DJIA opened +7, NASDAQ +8, S&P +1. 10 year note 4.11% -7 bp. FNMA 6.0 30 year coupon at 9:30 am +7 bp from Friday’s close and +6 bps from 9:30 am Friday.

The week is packed with key data points and the Fed.

For two weeks the 10 year note has traded quietly, the range based on the 10 year closes 4.17% to 4.08%. Strong technical resistance at 4.20%, support 4.04%. MBS prices traded in 25 bp swings. Today another quiet session. There hasn’t been any movement in the markets since 7:30 am this morning.

This Week’s Calendar:

Tuesday,

10 am FOMC meeting begins

9 am November Case/Shiller home price index (+0.4% from +0.6%, 20 city year/year +5.8% from 4.9%)

10 am January consumer confidence index (112.6 from 110.7)

December JOLTS job opening (8.70 million down from 8.790 million in November)

Wednesday,

7 am weekly MBA mortgage applications

8:15 am January ADP private jobs (130K from 164K)

8:30 am Treasury re-funding announcement (how much it needs for the next quarter)

9:45 am January Chicago purchasing managers index (48.1 from 46.9)

2 pm FOMC policy statement

2:30 pm J Powell press conference

Thursday,

8:30 am weekly jobless claims (214K unchanged from the prior week)

Q4 employment productivity and unit labor costs (productivity +1.9% annually, from 5.2% in Q3; unit labor costs +2.2% from -1.2% in Q3)

9:45 am January PMI manufacturing final index (50.3)

10 am January ISM manufacturing index (47.4 unchanged from December)

December construction spending (+0.5% from +0.4% in November)

Friday,

8:30 am January employment data (unemployment 3.8% from 3.7%, non-farm payrolls 170K from 216K, private jobs +142K from 164K, average hourly earning +0.3% from +0.4%, year/year 4.1% unchanged from December)

10 am University of Michigan final Jan consumer sentiment index (78.8, year/year inflation 2.9%)

December factory orders +0.4%

Source: TBWS

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