This morning markets have started under heavy pressure

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Published Date 2/5/2024

This morning rates are increasing, driven by Mr. Powell’s remarks over the weekend. The huge increase in job growth in December and January was kind of a shock given the magnitude of the increases, NFP jobs in December and January totaled 686K, private jobs increased 595K both well higher than even the most optimistic estimates.

Powell on CBS’s 60 minutes added to the increase in rates this morning. He reminded what he said at his press conference after the FOMC meeting last Thursday. The “danger of moving too soon is that the job’s not quite done.” Until employment data Friday the odds of a rate cut in March had been slipping, now the chance of a March cut is down to a 10% probability, in other words it won’t happen, a month ago a March cut was almost a certainty. Powell has been consistent recently that he doesn’t want to move rates lower until the Fed is convinced inflation will continue to decline; the jobs data on Friday tossed a big wrench in that outlook. He did say in the interview most Fed officials believe that it will be appropriate to start cutting rates this year.

The low for the 10 year note at 3.80% last July, last Thursday the low 3.83%. Technically consider it a failure at the recent low. Fundamentally a set back with huge job growth that now puts the Fed in a delay to assess the employment situation in the months ahead, whether growth continues and what the inflation outlook may be with very strong consumer sentiment and confidence. Markets will have to wait long for the next key inflation data; next Tuesday 2/16 January CPI, a week From Friday (16th) PPI.

There isn’t much first tier data this week, January ISM services index, weekly jobless claims are about it. Treasury will auction new 10s and 30s this week. Fed officials are the centerpiece; by my count 10 Fed officials will be speaking beginning this afternoon with Atlanta Fed Bostic.

At 9:30 am the DJIA opened -108, NASDAQ -9, S&P -9. 10 year note 4.13% +11 bp. FNMA at 9:30 am -26 bp from Friday's close and -28 bps from 9:30 am Friday.

At 9:45 am January PMI services index at 52.5 from 52.9 in December.

At 10 am ISM services expected at 52.1 from 50.6.

This Week’s Economic Calendar:

Monday,

9:45 am Final Jan PMI composite index (52.9) reported at 52.0.

10 am Jan ISM services index (52.1 from 50.6) reported 54.4.

2 pm Atlanta Fed Bostic

Tuesday,

12 pm Mester Cleveland Fed

1 pm Kashkari Minn. Fed

$54B 3 year note auction

2 pm Collins Boston Fed

7 pm Harker Philadelphia Fed

Wednesday,

7 am MBA mortgage application

8:30 am Dec US trade deficit (-$62.2B)

11 am Kukler Fed governor

11:30 am Collins Boston Fed

12 pm Barkin Richmond Fed

1 pm $42B of new 10s auction

2 pm Bowman Fed governor

3 pm December consumer credit (+$16.2B from +$23.7B in November)

Thursday,

8:30 am weekly jobless claims (222K)

11:30 Barkin Richmond Fed

1 pm $25B of new 30s auction

Friday,

Nothing

Source: TBWS

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