Markets will be focused on Consumer and Producer prices this week

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Published Date 1/13/2025

Last Friday’s December employment release rocked the markets with the strong increases in both NFP and private jobs. The 10 year note increased 8 bps, the 2-yr jumped 12 bps. The 10 year note at its highest since November 2023. Overnight the 10 year note did increase to 4.80% +3 bps from Friday but by 8 am back to unchanged at 4.77%. Inflation concerns, increasing US debt, re-thinking rate cuts from the Fed from 3 cuts two months ago to just one cut this year with a growing belief the Fed will not cut rates at all this year. It isn’t just in the US; rates are climbing globally. As rates increase the dollar is climbing also, the strongest since November 2022.

Based on recent data, Friday’s huge increase in jobs over the forecasts, the increase in JOLTS job openings, markets bewildered about what the Fed will do and as importantly what can the Fed do to cool the recent rate increases. There is a lot of talk that rates are increasing because the three Fed cuts assumed two months ago has vanished, yes that is one key but its inflation increasing, the Trump agenda believing it will increase inflation and the US debt. Fed rate cuts won’t stop the rise, we won’t really have a solid view about the Trump affect for at least six months. The incoming administration is a tsunami of major changes in policies both domestically and globally; when uncertainty prevails it normally causes rates to increase.

This week’s keys, December PPI tomorrow and December CPI on Wednesday.

At 9:30 am the DJIA began -53, NASDAQ -268, S&P -51. 10 year note 4.78% +1 bp. FNMA 6.0 30 year coupon -4 bps from Friday’s close and -21 bp from 9:30 am Friday: the 6.5 coupon -3 bps and -18 bps from 9:30 am Friday.

This Week’s Economic Calendar:

Monday,

2 pm December Treasury budget statement

Tuesday,

6 am December NFIB small business optimism index (101.3 from 101.7)

8:30 am December producer prices (month/month +0.3% from 0.4%, year/year +3.3% from 3.0%; core +0.2% unch from November, year/year +3.4% also unchanged from November)

Wednesday,

7 am weekly MBA mortgage applications

8:30 am December CPI (month/month +0.3% unch from November, year/year +2.9% from 2.7%; core CPI +0.2% from +0.3%, year/year 3.3% unch from November)

January Empire State manufacturing index (+1.0 from +0.2)

2 pm Fed Beige Book

Thursday,

8:30 am weekly jobless claims (214K from 201K)

December retail sales (+0.5% from +0.7%, ex vehicles +0.4% from +0.2%, ex vehicles and gas +0.4% from +0.2%)

January Philadelphia Fed business index (-8.0 from -16.4)

December import and export prices (month/month imports -0.1%, month/month exports +0.1%)

10 am January NAHB housing market index (46 from 46)

Friday,

8:30 am December housing starts and permits (starts 1.320 million from 1.289 million; permits 1.458 million from 1.505 million)

9:15 am December Industrial production and capacity utilization (production +0.3% from -0.1%, cap utilization 77.0% from 76.8%)

Source: TBWS

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