CHM Blog

US financial markets began relatively unchanged this morning after another spike in rates yesterday and the DJIA declined 274. There wasn’t any news overnight, and today no economic data on the schedule. Pre-opening trading in stock indexes at 8:30 am ET pointed to a better open, rate markets awaiting comments from Fed officials. On the schedule a few Fed officials due to speak; Loretta Mester (Cleveland), Neel Kashkari (Minneapolis), and Susan Collins (Boston) — will deliver remarks.

Hanging over the Fed and markets, a very strong employment report last Friday and yesterday’s January ISM services sector data, the headline index at 53.4 from 50.5; (new orders sub-index jumped from 52.8 to 55.0. The employment sub-index jumped from 43.8 to 50.5. And the prices paid index surged to 64.0 from 56.7). If there was any debate about the Fed cutting rates at the March meeting it all went away yesterday. Very strong increases in jobs, growing strength in recent economic reports suggests the Fed may have to even sit out the may FOMC meeting, that said though, investors and traders react to the next data story as it is the last one ever and that will increase volatility in US markets.

Explosive job gains, the huge increase in ISM services yesterday may delay the Fed but expect to hear the bulls and the Fed point out that it isn’t necessarily a path to increased inflation. It is possible even with growing economy that inflation can work lower, anything is possible and there is history to that view but usually it happens driven by unusual circumstances like the strong growth in 2021 reacting to the pandemic. All major central banks are echoing the same thing, no rate cuts until later this year, at best. Fed officials speaking this week won’t bend, they need more evidence before lowering rates. The next key inflation data is a week from today, January CPI.

At 9:30 am the DJIA opened -11, NASDAQ +52, S&P +12. 10 year at 9:30 am 4.15% -1 bp. FNMA 6.0 30 year coupon at 9:30 am +1 bp from yesterday’s close and unchanged from 9:30 am yesterday.

What is left today, at 1 pm Treasury will auction $54B of 3 year notes, usually the 3 year doesn’t get much focus regardless of the demand or lack of it. Whatever we hear from Fed officials today will be what we have heard prior and following Jerome Powell’s comments last week, so not likely to move markets much.

PRICES @ 10:00 AM

10 year note: 4.14% -2 bp

5 year note: 4.09% -3 bp

2 year note: 4.43% -4 bp

30 year bond: 4.32% -1 bp

30 year FNMA 6.0: @9:30 am 100.85 +1 bp (unch from 9:30 am yesterday)

30 year FNMA 6.5: @9:30 am 101.97 +1 bp (-3 bp from 9:30 am yesterday)

30 year GNMA 5.5: @9:30 am 100.04 +14 bp (+14 bp from 9:30 am yesterday)

Dollar/Yuan: $7.1800 unch

Dollar/Yen: 148.46 -0.21 yen

Dollar/Euro: $1.0743 unch

Dollar Index: 104.39 -0.06

Gold: $2,047.70 +$4.80

Bitcoin: 42,881 +514

Crude Oil: $73.53 +$0.75

DJIA: 38,444 +66

NASDAQ: 15,578 -19

S&P 500: 4942 -1

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

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