Markets will be focused on FOMC this week

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Published Date 3/18/2024

A quiet start today and likely to remain that way the rest of the day. This week is the FOMC meeting on Wednesday that dominates. Also this week, housing updates with NAHB housing market index, February housing starts and permits and February existing home sales.

FOMC meetings always a key factor, this one may be even more so with insight into what the Fed is thinking about when to begin lowering rates. Until last week the consensus in markets was that the Fed would begin lowering rates at the June FOMC meeting. The February CPI and PPI data last week brought uncertainty to when the Fed would begin, many pushed the first cut to the July meeting. Inflation increased more than expected in consumer prices and wholesale prices increasing interest rates, the 10 last week increased 22 bps and MBS prices lost 66 bps in price.

Two weeks ago, Powell testified in Congress he wasn’t prepared to say the impact of the pandemic is gone; “The pandemic is still writing the story of our economy right now.” “We should just be prepared to be surprised with the next chapter.” Investors having difficulty reading the Fed, inflation is not declining as quickly as the Fed thought a year ago, keeping the Fed edgy and why the Fed remains reluctant to call inflation dead. The economy and jobs continue to improve, albeit slower than last year, surprising the Fed with job losses remaining historically low. All FOMC meetings are critical, this one especially so with inflation stubbornly holding on.

At 9:30 am the DJIA opened +133, NASDAQ +196, S&P +43. 10 year note yield at 9:30 am 4.33% +1 bp. FNMA 6.0 30 year coupon at 9:30 am -4 bps from Friday’s close and -5 bps from 9:30 am Friday.

At 10 am March NAHB housing market index was expected unchanged at 48, the index increased to 51, the highest level since July 2023 and marks the fourth consecutive monthly gain for the index. It is also the first time that the sentiment level has surpassed the breakeven point of 50 since last July.

In the absence of any unexpected news the market will be quiet until Wednesday afternoon, then whatever the FOMC and Powell say will set the next move. The 10 year note trading at its 20, 40, and 200 day averages.

This Week’s Economic Calendar:

Monday,

10 am March NAHB housing market index (48, as reported 51).

Tuesday,

8:30 am Feb housing starts and permits (starts 1.449 million from 1.331 million; permits 1.500 million from 1.470 million)

10 am FOMC meeting begins.

1 pm 20 year bond auction

Wednesday,

7 am weekly MBA mortgage applications

2 pm FOMC policy statement and quarterly update

2:30 pm J Powell press conference

Thursday,

8:30 am weekly jobless claims (209K unch from prior week)

March Philadelphia Fed manufacturing index (-5.0 from +5.2)

Q4 current account deficit (-$209.0B)

9:45 am March PMI Flash (composite 51.5, manufacturing 51.8, service sector 52.0)

10 am Feb existing home sales (3.920 million from 4.00 million)

Friday,

9 am Powell speaking. The Federal Reserve Board will host a Fed Listens event on March 22 to hear perspectives on current economic conditions and how the pandemic experience has re-shaped the economy and the workforce. Powell will provide opening remarks, and Vice Chair Philip N. Jefferson and Governor Michelle W. Bowman will each moderate conversations with leaders from organizations that include the nonprofit, education, job search, agriculture, health care, and manufacturing sectors.

Source: TBWS

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