Markets prepare for a deluge of data this week

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Published Date 2/12/2024

Markets opened this morning unchanged from last Friday. Last week the calendar was void of key data; the 10 year note yield increased 14 bps, the 2 year note +11 bps. FNMA 6.0 30 year coupon price fell 35 bps. This week has a lot of key data, led by inflation reports tomorrow and Friday. The estimates for January CPI tomorrow are expected to reveal inflation in January ebbed lower. Today nothing until 2 pm when Treasury will report its budget for January, not a factor for traders. Trading today likely to be quiet ahead of inflation data tomorrow.

The bond market is still hanging onto Fed cuts this year but given the increases week the new thinking is the Fed may still cut rates but later than had been thought. The Fed won’t lower rates at the March FOMC meeting, the present belief though, still holding to four 25 bp cuts this year. It is a moving target, the Fed is on the outlook for the economy, soft landing, hard landing, recession forecasts change quickly on each key report. The Fed making clear it wants more evidence of slowing inflation before beginning rate reductions yet worries that keeping rates high could trigger a decline in the economic outlook. Investors don’t seem to be concerned, the stock indexes making new all-time highs fully convinced that the economy is on solid footing. Thursday’s January retail sales will get attention.

At 9:30 am the DJIA opened -17, NASDAQ -8, S&P -1. 10 year note 4.16% -1 bp. FNMA 6.0 30 year coupon at 9:30 am +6 bps from Friday’s close and +7 bps from 9:30 am Friday morning.

Today not looking for much change in stocks or rates ahead the data coming tomorrow and through the reminder of the week. The key 10 year at 4.16% hasn’t breached 4.20% in a month and won’t do it today, the forecasts for CPI and PPI along with retail sales on Thursday are keys. Each day we get input from Fed officials, analysts, and investor groups, much of it now tilting to the belief the Fed will be cutting rates soon, a lot of that view already discounted in present levels. The potential of increased volatility in stocks and rates remains high, this week promises to be volatile after flat lining last week.

This Week’s Economic Calendar:

Monday,

2 pm January Treasury budget (-$21.0B from December -$129.4B)

Tuesday,

6 am January NFIB small business optimism index (92.4 from 91.9)

8:30 am January CPI (overall month/month +0.2% from +0.3%, year/year overall +3.0% from 3.4%; core CPI month/month +0.3% unch from December, year/year 3.7% from 3.9%)

Wednesday,

7 am weekly MBA mortgage applications

Thursday,

8:30 am weekly jobless claims (219K from 218K the prior week)

January retail sales (month/month -0.1% from +0.6% in December, ex vehicles +0.2% from +0.4%)

February Philadelphia Fed business index (-9.0 from -10.6)

February Empire State manufacturing index (-12.5 from -43,7 in January)

January import and export prices (imports month/month –0.1%, exports month/month -0.2%)

9:15 am January industrial production (+0.2%, capacity utilization (78.8% from 78.6% in December)

10 am December business inventories (+0.4%)

Feb NAHB housing market index (46 from 44 in January)

Friday,

8:30 am January PPI (month/month +0.1% from -0.1%, year/year +0.7% from +1.0%; ex food and energy month/month +0.1% from 0.0%, year/year +1.7% from +1.8% in December)

January housing starts and permits (starts 1.470 million from 1.460 million; perm its 1.510 million from 1.495 million)

10 am University of Michigan mid-month consumer sentiment index (80.0 from 79.0)

Source: TBWS

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