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Market Matters – January 15, 2021 Edition


 

This week we saw the 10-year breakout, topping out at 1.186% on Tuesday, before coming back down to 1.08~1.11 in the last few days. The 10-year is still in the uptrend we have been in since August, so, it is prudent to be safe and stay defensive. President Biden has released his $1.9 trillion coronavirus relief plan. Assuming that most of those measures are passed and that the vaccine rollout keeps progressing, that would be a pretty good shot in the arm for the economy and could lead to some inflation. If we see any situations where there is a material slowdown, this would keep rates lower. On the flip side, if progress is better than expected, that would push inflation expectations higher. The markets will continue to watch and trade around the progress of the virus and vaccine, along with progress on additional stimulus.

 

Initial Jobless Claims
Initial Jobless Claims for the week of January 9th rose +181k to 965k, the highest since the week of August 22nd last year (1.011mln). This is also the largest one-week increase since the week of March 28 last year. This now raises the 4-week moving average of claims to 834.3k, the highest in 15 weeks. Continuing claims, which lag a week, rose +199k to 5.271mln. Prior to this week’s increase, continuing claims had fallen in each week but 3 since July 18th, and over that time, they fell a total of 11.879mln.
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Consumer Price Index

CPI for December posted up +.4% on headline, and up +.1% on core (ex-food and energy). Looking at the YoY numbers, headline CPI is at +1.4%, with the core holding steady at +1.6% for the third month in a row. On the monthly headline data, we see a big jump in energy price by +4.0%, which included a +10.0% rise in fuel oil, and +8.3% rise in motor fuel. Food prices rose +.4% on the month with stronger contributions from food at home (groceries) and food away from home (eating/drinking establishments). In other sectors, medical care prices continued to weaken, down -.2% on the month, with shelter prices also softer, only up +.1% now for the fifth straight month. Within the wage data portion, real average weekly earnings increased by +.1%, posting the third consecutive month at that same level. Real average hourly earnings for all employees increased by +.4% MoM, based on a +.8% increase on average hourly earnings and a +.4% increase in the consumer price index for all urban consumers. Over the past 12 months, real average hourly earnings increased by +3.7%, while real average weekly earnings rose +4.9%. Overall, inflation at the consumer level came in-line with expectations for December and while we’ve continued to see comments from Fed members around the expected rise, we are still well below the Fed’s 2% target rate.

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Producer Price Index
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Retail Sales

 



We feel bearish on the market as the 10-year is at 1.085 %. There is resistance at 1.0% with support at 1.186. We still feel the safest bet is to stay defensive and if you see any price improvements, it is best to take them.

 

Call today to discuss this week’s market trends.

 

 

Pam Jamison
Loan Originator
NMLS# 277012
8310-1 N. Capital of Texas Highway, Suite 195, Austin, TX 78731
512-775-1001 | 512-582-8778
pam.jamison@primelending.com | 
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