Another calm day for markets

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Published Date 11/8/2023

Stocks and rates opened flat this morning, the 10 year note unchanged, MBSs in early trading at 8 am ET -5 bps from yesterday’s close. Waiting for Jerome Powell, scheduled to do opening remarks at the Division of Research and Statistics Centennial Conference at 9:15 am. Tomorrow at 2 pm Powell will lead a policy discussion at the 24th Jacques Polak Annual Research Conference.

The day will be about Fed officials, already this morning Federal Reserve Governor Lisa Cook is worrying about geopolitical issues. Russia in Ukraine, the mid-east, and China. “Russia’s ongoing war against Ukraine continues to weigh on many economies in a variety of ways, including sustained disruptions to regional trade in food, energy and other commodities,”… “The conflict in the Middle East could generate further risks to energy and financial markets, as well as a worsening of global humanitarian and migration challenges,”… “The global financial system could be affected by a pullback from risk-taking, declines in asset prices, and losses for exposed businesses and investors." In China, “a further slowdown in economic growth could worsen financial stresses,” which “could spill over to other emerging market economies,” she said nothing about monetary policy.

At 1:40 pm John Williams, NY Fed, at 2 pm Michael Barr Fed governor, at 4:45 pm Phillip Jefferson, Fed vice chair will close the Division of Research and Statistics Centennial Conference. The Fed will push back against the growing forecasts of interest rate cuts next year. While more rate increases are largely off the table for now, expecting rate cuts sometime next year is getting more focus. The equity markets becoming very pricy, the likelihood of a major decline is increasing with each drive higher like we saw last week when the DJIA increased 1800 points.

Crude oil is continuing to decline, yesterday down over $3.00 and early this morning more weakness. Global demand is declining along with economic weakness, yet another sign global growth, including the US is slowing. The price the lowest in the last three months and closing in on the lowest price this year at $67.00/barrel. The American Petroleum Institute reported crude inventories increased by 1.1 million barrels last week.

Weekly MBA mortgage applications increased last week; the composite +2.5% from the prior week, purchases +3.0% and re-finances +1.6%.

At 9:30 am the DJIA opened +50, NASDAQ +15, S&P +7. 10 year note at 9:30 am unchanged at 4.57%. FNMA 6.5 30 year coupon at 9:30 -4 bps from yesterday’s close and +13 bps from 9:30 am yesterday.

At 1 pm Treasury will auction $40B of new 10 year notes, demand will get focus.

Today the focus is on Fed officials. The 10 still holding above 4.5%, a key resistance level.

Source: TBWS

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