Markets will be focused on the minutes from the December FOMC

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Published Date 1/3/2024

Yesterday, the first trading day, stock indexes mixed with DJIA barely holding improvement while the NASDAQ and S&P declined. This morning in early trading the 10 year note yield was up +3 bps and MBS prices on the open -13 bps from yesterday.

Weekly MBA mortgage applications for last week tumbled 10.7%, purchase apps -7.8% and re-finance applications fell 18.1%. It was Christmas week so what would one expect.

This afternoon the minutes from the December FOMC meeting will be released. Richmond Fed President Barkin speaking this morning repeating once again the Fed’s mantra; the timing and pace of any changes to interest rates this year will depend on the economic data. Whether inflation is continuing to come down and whether the broader economy continues to fly smoothly “will determine the pace and timing of any changes in rates.” “There’s no autopilot,” Barkin said, urging the audience to “buckle up.”“So, I can’t give more guidance from the flight deck. Forecasting is difficult, and conditions are ever evolving.” At his press conference after the December meeting Powell tilted implying no more rate increases and hinted rate cuts were in the offing. The 10 year note since December 13th has declined from 4.24% to 3.87% last Friday. The next FOMC meeting January 30th and 31st.

At 9:30 am ET the DJIA opened -122, NASDAQ -101, S&P -22. 10 year 4.00% +6 bps. FNMA 6.0 30 year coupon at 9:30 am -22 bps from yesterday’s close and -27 bps from 9:30 am yesterday.

Two key data points at 10 am; November JOLTS job openings were expected at 8.750 million from 8.733 million; job openings increased to 8.790 million and October revised from 8.733 million to 8.852 million. The December ISM manufacturing index expected at 47.2 from 46.7 reported 47.4. The overall economy continued in contraction for a third month after one month of weak expansion preceded by nine months of contraction and a 30-month period of expansion before that. (A Manufacturing PMI® above 48.7 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory at 47.1 percent, 1.2 percentage points lower than the figure of 48.3 percent recorded in November. The Production Index reading of 50.3 percent is a 1.8-percentage point increase compared to November's figure of 48.5 percent. The Prices Index registered 45.2 percent, down 4.7 percentage points compared to the reading of 49.9 percent in November. The Backlog of Orders Index registered 45.3 percent, 6 percentage points higher than the November reading of 39.3 percent. The Employment Index registered 48.1 percent, up 2.3 percentage points from the 45.8 percent reported in November.

The 10 am data improved the rate markets; the 10 year held 4.00% prior to the data, the yield dropped to 3.96% +2 bps and MBS prices 8 bps better than 9:30 am.

Source: TBWS

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