09/26/2023
Daily Market Analysis
Markets were taken aback last week when the Fed and other key central banks made it clear rates are going to stay higher longer than had been thought. The Fed and ECB hanging on to their 2.0% inflation goals may still consider another rate increase later this year according to many Fed officials speaking out recently, whether it happens depends on incoming data. Two Fed officials last week said at least one more rate hike is possible and that borrowing costs may need to stay higher for longer for the central bank to ease inflation back to its 2% target. While Boston Fed President Susan Collins said further tightening “is certainly not off the table,” Governor Michelle Bowman signaled that more than one increase will probably be required. On Friday, the August PCE inflation report, the core year/year forecast is 3.9% down from 4.2%. Powell continues to look mostly at the core (ex-food and energy) although with energy prices increasing higher costs will likely feed through the economy; the year/year overall PCE expected at 3.5% from 3.3% in July. Traders are increasingly concerned that rising oil prices risk fanning inflation, which will make it difficult for policymakers to reduce rates anytime soon.
A risk-off mood is setting the stage for today, with stock futures in the red as Treasury yields keep reaching for the sky. Don’t look to JPMorgan CEO Jamie Dimon to calm things down, as he warned that even 7% interest rates are possible. Investors need to be prepared for 7% interest rates and most of them aren’t. That’s the stark warning from JPMorgan Chase CEO Jamie Dimon over potential risks for the U.S. economy. “Going from zero to 5% caught some people off guard, but no one would have taken 5% out of the realm of possibility. I am not sure if the world is prepared for 7%,” Dimon said in an interview with the Times of India.
The S&P CoreLogic Case-Shiller 20-city house price index rose 0.9% in July, as compared with the previous month. Prices were up for the sixth month in a row. Year-over-year home prices in the 20 major metro markets in the U.S. were up 0.1% nationally. The forecasts were for year/year at -0.6%.
At 9:30 am the DJIA opened -195, NASDAQ -87, S&P -29. 10 year at 9:30 am -2 bp to 4.52%. FNMA 6.0 30 year coupon at 9:30 am +9 bps -5 bps from 9:30 am yesterday. On the day yesterday the 6.0 coupon was down 46 bps as the 10 year increased 10 bps.
At 10 am August new home sales, expected at 699K sales declined to 675K from July’s revised 739K from originally 714K.
Sept consumer confidence declined; the index expected at 105.8 declined to 103.0 but August revised from 106.1 to 108.7.
PRICES @ 10:00 AM
10 year note: 4.52% -2 bp
5 year note: 4.60% -2 bp
2 year note: 4.13% -1 bp
30 year bond: 4.64% -1 bp
30 year FNMA 6.0: @9:30 am 98.98 +9 bp (-5 bps from 9:30 am yesterday)
30 year FNMA 5.5: @9:30 am 97.05 +12 bp (-4 bp from 9:30 am yesterday)
30 year GNMA 5.5: @9:30 am 97.41 +12 bp (-8 bp from 9:30 am yesterday)
Dollar/Yuan: $7.3097 -$0.0021
Dollar/Yen: 148.98 +0.10 yen
Dollar/Euro: $1.0592 unch
Dollar Index: 105.97 -0.03
Gold: $1925.70 -$10.90
Bitcoin: 26,236 -58
Crude Oil: $89.79 +$0.11
DJIA: 33,824 -182
NASDAQ: 13,132 -140
S&P 500: 4301 -36
