Markets calm despite rise in import prices

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Published Date 1/13/2023

The 10 began a little higher at 3.48% +5 bps after declining 11 bps yesterday, early trade on MBSs -14 bps from yesterday.

Dec import and export prices at 8:30 am ET; imports expected -0.9% increased 0.4%, yr./yr. 3.5% from November’s +2.7%. Export prices expected to have declined 0.7%, declined 2.6%, yr./yr. 5.0% down from November’s 6.1%.

Prior to the 9:30 am open the DJIA traded -266, NASDAQ -130. The equity markets continue to chop back and forth, yesterday the DJIA increased 217.

Many of the big banks that reported earnings this morning were lower as expected, Citi did report higher earnings.

Dec CPI released yesterday, consumer prices rose 6.5% in the 12 months through December, declining for a sixth straight month and marking the slowest inflation rate in more than a year. After a year of sweating every inflation report reactions from traders and investors are not as violent recently, inflation still critical but market reactions are not as radical these days. Inflation topped out four months ago, since then still too high for the Fed but it continues to ease. The Fed though, not about to buckle and will increase the FF rate 25 bps on the 1st of February and is fully discounted in markets now. With inflation slowing there is an increasing view that the end is in sight for the Fed rate increases.

At 9:30 am the DJIA opened -2160, NASDAQ -93, S&P -31. 10 yr. at 9:30 am 3.47% +4 bps. FNMA 5.5 30 yr. coupon at 9:30 am –11 bps and -8 bps from 9:30 am yesterday.

At 10 am the mid-month U. of Michigan consumer sentiment index expected at 60.0 from 59.7 in Dec; the index jumped to 64.6; we will have details this afternoon but another read that consumers still optimistic, more than stock investors.

Atlanta Fed Pres, Bostic said yesterday; “If the information I get from business leaders and others is consistent with that, and the first signals we are getting is they are, I’ll be comfortable moving at a slower rate, even 25 basis points, relative to what you saw us do through 2022,” Philadelphia Fed President Patrick Harker, said rate hikes of a quarter-percentage point “will be appropriate going forward.”

Source: TBWS

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