The market will be focused on the minutes from the last FOMC meeting

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Published Date 2/21/2024

Rates began the session unchanged from yesterday with no data again today, waiting for the FOMC minutes at 2 pm ET this afternoon. Stock indexes opened weaker as investors wait for NVidia earnings this afternoon.

Last week MBA mortgage applications dropped. The Market Composite Index, a measure of mortgage loan application volume, decreased 10.6%. The Refinance Index decreased 11% from the previous week and was 0.1% higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 10% from one week earlier. The refinance share of mortgage activity decreased to 32.6% of total applications from 34.0% the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 7.4% of total applications. The FHA share of total applications decreased to 13.2% from 13.5% the week prior. The VA share of total applications decreased to 12.1% from 13.3% the week prior.

At 1 pm Treasury will auction $16B of 20 year bonds, an hour ahead of FOMC minutes.

At 2 pm FOMC minutes.

At 9:30 am the DJIA opened -33, NASDAQ -95, S&P -13. 10 year note 4.27% unchanged. FNMA 6.0 30 year coupon at 9:30 am +6 bps from yesterday’s close and +10 bps from 9:30 am yesterday.

Markets totally focused on the next move from the Fed. As is normal the outlook continues to be murky, until two weeks ago the Fed was expected to begin lowering rates at the March meeting, now that isn’t likely after inflation increased in January. Debates now, when will the fed move and what direction. The next key measurement of inflation hits a week from tomorrow with January personal consumption expenditures (PCE). This week has little data, next week PCE, Q4 GDP, February consumer confidence index, University of Michigan consumer sentiment, January personal income and spending, January new home sales, January pending home sales.

Inflation is key. The Labor Department put some data out about the cost of food this morning. Prices at restaurants and other eateries were up 5.1% last month compared with January 2023, while grocery costs increased 1.2% during the same period. Relief isn’t likely to arrive soon. Restaurant and food company executives said they are still grappling with rising labor costs and some ingredients. History shows food prices after spiking higher as it has with the pandemic don’t decline, in 1991 consumers spent 11.4% of income on food, the latest data in 2002 shows consumers spend 11.3% of income on food according to USDA. The Fed isn’t concerned though, inflation measured excluding food and energy.

Source: TBWS

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