FOMC will be the focus today

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Published Date 1/31/2024

The FOMC and Powell later this afternoon, in the meantime data this morning bolstering rates, the 10 year note yield at 8:30 am ET -2 bps after falling to 4.00% overnight. At 10 am 3.95% -8 bps.

January ADP private jobs were weaker than forecasts, +107K with estimates at 145K, December revised from 164K to 158K. Yesterday December JOLTS opening were stronger than forecasts suggesting businesses are still looking for workers. ADP said jobs were mostly in leisure and hospitality, construction, and transportation. ADP doesn’t include government workers, NFP jobs expected at 180K on Friday when the official BLS data is released.

Weekly MBA mortgage applications slipped last week; -3.7% after increasing 3.7% the week prior. Purchase application -11.4% from +7.5% and re—finances +1.6% from -7.0%. The decline likely due to weather conditions last week.

Q4 employment cost index forecasts +1.0% reported at +0.9%, the smallest increase in over two years, Q2 2021. Year/year employment costs were up 4.2%, the Fed wants labor costs at about 3.5% year/year. The data is considered a main component measuring labor costs.

Supporting the outlook for potential lower rates, yesterday the IMF added its view that inflation is easing even as growth being steady. Looking for global growth at 3.1% this year, up from previous forecast of 2.9% and the same growth in 2023. IMF saying global inflation is expected at 4.4% down from 6.8% last year.

Treasury released the details of its quarterly refunding this morning, adding support for rates. More borrowing for the quarter than last quarter but saying there will be no more increased borrowing after this quarter. Most of the increases come on the 2 year and 5 year notes, $3B a month more, 10 year note increasing $2B a month and 30 year $1B a month.

At 9:30 am the DJIA opened +68, NASDAQ -165, S&P -24. 10 year 3.99% -4 bps. FNMA 6.0 30 year coupon at 9:30 am +20 bps from yesterday’s close and +14 bps from 9:30 am yesterday.

At 9:45 am January Chicago purchasing managers index, expected at 48.1 from 46.9 declined to 46.0. Under 50 considered contraction.

Waiting for the FOMC and Powell this afternoon. No rate cuts at this meeting, the focus on what may lie ahead for the Fed. There won’t be quarterly projections at this meeting so it will fall on what Jerome Powell will say at his press conference. Recent improvements in rates the last few sessions suggest traders are expecting a rate cut at the March meeting, what comes from Powell will either confirm or cool that idea.

Source: TBWS

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