Markets hit with a mixed bag of inflation data ahead of Christmas weekend

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Published Date 12/23/2022

November personal income expected +0.3% increased 0.4%, personal spending expected +0.2% increased 0.1%. The key PCE inflation m/m expected +0.2% increased 0.1%, yr./yr. +5.5% as expected and down from +6.0% in October. Core PCE m/m +0.2% as forecasts, yr./yr. 4.7% against 4.6% expectations and down from 6.1% in October. Inflation readings continue to slow, inflation has cooled but not yet enough to change the Fed’s mind about more rate increases in early 2023. Yesterday Q3 GDP final was much stronger than the preliminary reading at 2.9%, the final GDP +3.2%. The consumer still spending, Q3 on the plus side after two quarters of declining growth. Not so fast though, Nov retail sales slowed substantially, down 0.6%, so we are left with more uncertainty. Wage growth is slowing, low wage earners being run over by inflation. The Fed is focused on wages now, looking for slowing that would slow inflation.

Nov durable goods orders declined 2.1% against forecasts of -0.8%; excluding transportation orders expected 0.0% increased 0.2%.

The two 8:30 am releases pushed the 10 yr. note up 4 bps to 3.72% and MBS prices at 9 am -14 bps. After strong selling in stock indexes yesterday the reaction to the 8:30 am data was subdued with little change in the three key indexes.

At 9:30 am the DJIA opened -56, NASDAQ -30, S&P -5. 10 yr. 3.74% + 6 bps. FNMA 5.5 30 yr. coupon at 9:30 am -31 bps and -33 bp from 9:30 am yesterday.

At 10 am Nov new home sales, expected at 600K units increased 640K but October revised lower to 605K from 632K. The U. of Michigan final Dec consumer sentiment index expected at 59.1, increased to 59.6.

The bond and mortgage markets will close today at 2 pm, other markets open the usual times. All markets closed on Monday celebrating Christmas.

Source: TBWS

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