Markets prepare for a very volatile week

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Published Date 2/3/2025

Tariffs are on, overnight the US stock market got hit hard and rates fell. Markets remain unsure how the tariffs will impact the economy, but some traders overnight took the view the economy will slow and in turn inflation will ease. The 10 year note overnight traded at 4.49% -6 bps before inching back to 4.51% -3 bps from Friday’s close. At 8 am ET the DJIA -650, NASDAQ -420, S&P -99.

Last Friday late, St Louis Fed James Bullard said that inflation will slow markedly this year. This week’s Fed calendar is packed with Fed officials every day, very likely one of the themes this week will be what those Fed officials think waht affects the tariffs will have on the economy and rates.

At 9:30 am the DJIA opened -561, NASDAQ -422, S&P -102. 10 year at 9:30 am 4.50% -4 bps. Not sure of the accuracy this morning on MBS prices, FNMA 6.0 coupon at 9:30 am +5 bps from Friday and +1 bp from 9:30 am Friday.

At 10 am January manufacturing from ISM at 50.9, better than forecasts. December construction spending +0.5%, better than 0.3% estimates.

The key 10 year note is at 4.50% level, the level that has capped the recent decline on the 10 year note. Key data later this week and many Fed officials ready to pontificate.

This Week’s Economic Calendar:

Monday,

10 am January ISM manufacturing index (expected 49.5, reported 50.9)

December construction spending (expected +0.3%, reported +0.5%)

Tuesday,

10 am December JOLTS job openings (8.000 million from 8.098 million)

December factory orders (-0.6% from -0.4% in November)

Wednesday,

7 am weekly MBA mortgage applications

8:15 am ADP January private jobs

8:30 am December US trade deficit (-$92.0B from -$78.2B)

Treasury refunding announcement for the next two quarters.

9:45 am January PMI services sector (52.8, unch from December)

10 am January ISM services sector index (54.0 from 54.1)

Thursday,

8:30 am weekly jobless claims (215K from 207K)

Q4 prelim productivity and unit labor costs (productivity 1.8% from 2.2%, unit labor cost 3.3% from 0.8%)

Friday,

8:30 am January employment data (unemployment 4.1% unch from December, NFP jobs 158K from 256K, private jobs 140K from 223K, average hourly earnings +0.3% month/month unch from December, year/year +3.8% from 3.9% in December)

3 pm December consumer credit (+$16.0B from -$7.5B)

Source: TBWS

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