Markets get a boost to end the week

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Published Date 3/1/2024

For two weeks, after the increase in inflation on the CPI report, the main thing on minds was yesterday’s Fed preferred personal consumption expenditures (PCE). It came and went with no change in rates, there were no surprises between reality and the estimates. PCE year/year inflation, the highest in a year but it was expected. The yield curve ended the day with yields fractionally lower (10 year -1 bp to 4.26%), MBS prices yesterday increased 6 bps from Wednesday. The 10 remains tied to its very tight range this morning, the note began +1 bp, MBS prices down 3 bps.

That core year/year inflation at 2.8% was right on estimates and down from 2.9% in December, yet it is the highest in a year, suggests (now) the Fed will wait longer to lower rates. The present thinking all over, with some comments this morning that the Fed may not lower rates this year. The Fed will lower rates. The question remains when and what we saw yesterday doesn’t change the general perception that the first cut may not be until the July FOMC meeting. The varying forecasts should not mean too much, every inflation measurement can change the dynamic and there are miles to go digesting data and the Fed officials’ remarks. There are seven officials talking today.

Looking for anything that may add credence to yesterday’s action, weekly jobless claims were higher than forecasts suggesting the labor market is softening. That is what media is saying today. One week of higher claims isn’t a trend and taking the increase of 13K filings as a sign of weakness is ridiculous on its face, but what else is there to say.

At 9:30 am the DJIA opened -21, NASDAQ +32, S&P +6. 10 year 4.27% +1 bp. FNMA 6.0 30 year coupon at 9:30 am -4 bps from yesterday’s close and -4 bp from 9:30 am yesterday.

At 10 am February ISM manufacturing index expected at 49.5 declined to 47.8. January construction spending expected +0.2% declined 0.2%.

The main event, at 10 am the University of Michigan consumer sentiment index, thought to be unchanged from the mid-month read at 79.6, reported at 76.9.

Source: TBWS

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