Market Paying Close Attention To The Fed And Inflation Data Today

Stock indexes opened a little better this morning, and the interest rate sector unchanged from yesterday at 8:00 am ET this morning.

Weekly MBA mortgage applications were a bit soft last week; composite apps -6.4% from the prior week, purchase apps -3.0%, and refinance apps -8.0%. Yesterday though MBAs Builder Application Survey data for January 2020 shows mortgage applications for new home purchases increased 35.3% compared to a year ago. Compared to December 2019, applications increased by 40%. MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 865,000 units in January 2020, based on data from the BAS. The seasonally adjusted estimate for January is an increase of 25.5% from the December pace of 689,000 units. On an unadjusted basis, MBA estimates that there were 66,000 new home sales in January 2020, an increase of 37.5% from 48,000 new home sales in December. Conventional loans composed 69.5% of loan applications, FHA loans composed 17.8%, RHS/USDA loans composed 0.8 percent, and VA loans composed 12%. The average loan size of new homes increased from $338,625 in December to $346,140 in January.

At 8:30 am ET Jan PPI; expected +0.1% increased 0.5%; yr/yr +2.1% on expectations of 1.7%. The core PPI thought to be up 0.1% also increased 0.5%, yr/yr +1.7% from +1.1% in Dec. Yr/yr PPI less food and energy and trade services was expected +1.3%, as released +1.5%. Those headlines were somewhat surprising, but with all of the disruptions caused by the virus, we don’t see it as a serious increase in inflation in the long run. Traders didn’t take it well; before the release, the 10 yr was unchanged at 1.56%; it increased to 1.58%, and MBS prices that were unchanged from yesterday dropped 6 bps.

At 8:30 am ET, Jan housing starts and permits; starts expected at 1.420 mil increased to 1.567 mil, and Dec was revised from 1.608 mil to 1.626 mil that contributed to a decline of 3.6%. Permits expected at 1.453 mil increased to 1.551 mil, Dec also revised higher from 1.416 mil to 1.420 mil; permits increased 9.0%.

More weakness outlooks for Germany today, The Association of German Chambers of Industry and Commerce expects Germany’s GDP to grow just 0.7% in 2020 with no upturn in sight. Germany is the economic powerhouse in Europe, while the US outlook remains at 3.0% GDP this year, the rest of the globe is looking soft. The IMF is more positive, saying it sees a rebound in global growth this year, despite risks of a further spread of the coronavirus that has now killed 2,010 and infected 75,286 people around the world. Most of the virus still confined to China; China’s death toll hit 2,004; 74,185 confirmed cases.

Later this afternoon (2:00 pm ET), the FOMC minutes from the Jan meeting will be released.

According to a Reuters/Ipsos national poll released yesterday, Bloomberg has moved to second place among Democrats behind the front-runner Bernie Sanders. 25% of registered Democrats and independents said they would vote for Sanders, Bloomberg 17% of respondents, versus 13% for Biden; Buttigieg 11%, Warren 9%, Klobuchar 5%.

Source: TBWS