Markets will be focused on FOMC this week

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Published Date 12/16/2024

Last Friday the 10 year note +7 bps and MBS prices -17 bps. This morning a slightly better start ahead of the FOMC policy statement on Wednesday, the 10 year note 4.37% -3 bps, MBS price at 9 am ET +10 bps. The fractional increase doesn’t signal anything, just prepping for the FOMC. The economic calendar has several key data points but its what the Fed does and what Powell has to say on Wednesday that will set the tone. Also, later this week the Bank of England is expected to lower rates.

FOMC meeting begins tomorrow but the policy statement and Powell is on Wednesday. The CME FedWatch Tool is predicting a 97% chance the FOMC will cut the Fed funds rate by 25 bps, what follows next is what traders are looking for. The policy statement and Powell are the keys for the outlook. Inflation over the past two months hasn’t shown declines, CPI and PPI both slightly firmer than forecasts and Friday the Fed’s go to inflation expectations also expected to have increased; year/year overall PCE estimates +2.5% from +2.3%, core PCE year/year +2.9% from 2.8%.

This is the final full week of trading in 2024. Next week Christmas is Wednesday, an early close on Tuesday and few will show up on Thursday and Friday. The following week, an early close on Tuesday, New Year on Wednesday and again thin trading on Thursday and Friday.

This morning the DJIA opened +9, NASDAQ +104, S&P +18. The 10 year note at 9:30 am 4.38% -2 bps. FNMA 6.0 30 year coupon at 9:30 am +6 bps from Friday’s close and -7 bps from 9:30 am Friday. By 10 am the 10 year note unchanged and MBS prices +4 bp.

At 9:45 am December preliminary December PMI.

This Week’s Economic Calendar:

Monday,

8:30 am December NY Empire State manufacturing index (expected 9.1, reported +0.2%)

9:45 am December prelim PMI (composite54.6, manufacturing 49.6 from 49.7, services 55.9 from 56.1)

Tuesday,

8:30 am November retail sales (+0.5% from +0.4%, ex vehicles +0.4% from +0.1%)

9:15 am November Industrial Production and Capacity Utilization (production +0.3% from -0.3%, capacity utilization 77.3% from 77.1%)

10 am December NAHB housing market index (47 from 46)

Wednesday,

7 am weekly MBA mortgage applications

8:30 am November housing starts and permits (starts 1.340 million from 1.311 million; permits 1.430 million from 1.416 million)

2 pm FOMC policy statement

2:30 pm Jerome Powell’s press conference

Thursday,

8:30 am weekly jobless claims (232K from 242K)

Final Q3 GDP (2.8%, personal consumption expenditures +3.5%; both unchanged from the preliminary release)

December Philadelphia Fed business index (+2.5 from -5.5)

10 am November existing home sales (+4.05 million from 3.96 million)

Friday,

8:30 am November personal income and spending (income +0.4% from +0.6%, spending +0.5%frm +0.4%)

November PCE inflation (month/month overall +0.2% unch from October, year/year +2.5% from 2.3%; core PCE month/month +0.2% from +0.3%, year/year +2.9% from 2.8%)

10 am December University of Michigan consumer sentiment index (74.0 unch from mid-month)

Source: TBWS

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