Markets will be focused on inflation data this week

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Published Date 8/26/2024

Last Friday, finally Powell gave the green light to lower rates at the September FOMC. It wasn’t a surprise, markets thoroughly expected it. At the meeting next month FOMC will cut the rate on the FFs by 25 bps and that is well discounted in present levels. What comes later will continue to be driven by incoming data on inflation, jobs and the economy. On Friday, the next inflation report when July PCE is released, based on present expectations inflation based on that report picked up a little from June.

July durable goods orders increased 9.9%, the surge, like the downturn in June, was driven by transportation equipment orders, which soared 34.8%. Spending in the business sector was weak, pushed by non-defense spending. Overall orders month/month were the highest since May 2020.

At 9:30 am ET the DJIA opened +72, NASDAQ -13, S%P +8. 10 year -1 bp at 3.79% -1 bp, the 2 year note -1 bp. FNMA 5.5 30 year coupon at 9:30 am +7 bps from Friday’s close and +14 bps from 10:30 am Friday morning after Powell’s talk. **By 10 am ET MBS prices were down 6 bps from Friday with the 10 year note increasing to 3.82% +2 bp.

Treasury will sell $183B of 2s, 5s and 7s this week. Demand will be closely watched. The main scheduled events occur on Thursday and Friday, weekly claims, GDP and PCE inflation data.

Fundaments currently favorable. Technicals continue to hold positive.

This Week’s Economic Calendar:

Monday,

8:30 am July durable goods orders (+4.5%, ex transportation 0.0%, core capital goods +0.1%; as released new orders +9.9%, ex transportation -0.2% and core capital goods +0.1% after June revised to +0.5% from +1.0%)

Tuesday,

9 am June Case/Shiller home price index (+0.2%)

10 am August consumer confidence index (100.1 from 100.3 in July)

1 pm $69B 2 year note auction

Wednesday,

7 am weekly MBA mortgage applications

1 pm $70B 5 year note auction

Thursday,

8:30 am weekly jobless claims (232K unch)

Q2 second look GDP (+2.8%, annual PCE +2.3)

10 am July pending home sales (+1.0% from +4.8% in June)

1 pm $44B 7 year note auction

Friday,

8:30 am July PCE inflation (month/month +0.2% from +0.1%, year/year +2.6% from 2.5%; core PCE month/month +0.2% unch from June, year/year +2.7% from 2.6%)

July personal income (month/month +0.2% unch from June, personal spending month/month +0.5% from +0.3%)

9:45 am August Chicago purchasing managers index (46.4 from 45.3)

Source: TBWS

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