Market Update – Monday
Stocks are mixed this morning, while Mortgage Bonds are trading near unchanged levels to start the week.
Over the weekend, Fed Governor Michelle Bowman reiterated her view that the Fed should cut rates three times this year, totaling 75 bps. She cited the latest jobs data—unemployment just shy of rounding up to 4.3% and average job growth of only 35,000 over the last three months—and warned that delaying cuts could force more abrupt and disruptive moves later.
Fed Chair Search Broadens
The Wall Street Journal reports that the list of potential candidates for the next Fed Chair has grown to ten. Two new names—former St. Louis Fed President James Bullard and former George W. Bush adviser Marc Sumerlin—join previously mentioned possibilities such as Kevin Warsh, Kevin Hassett, Chris Waller, Adriana Kugler Miran, and Bowman. It’s unclear whether former President Trump is strategically keeping markets guessing or genuinely weighing these alternatives.
CPI Preview
Tuesday’s Consumer Price Index (CPI) will be a key market driver. For July, headline CPI is expected between 0.16% and 0.2% (replacing last year’s 0.14%), implying year-over-year inflation could hold at 2.7% or edge up to 2.8%. Core CPI (ex-food and energy) is projected between 0.24% and 0.3% (replacing 0.19%), making a rise in the annual rate from 2.9% to 3.0% likely. Shelter costs remain pivotal; another soft shelter print could help keep inflation contained.
This Week’s Key Reports
- Tuesday: Consumer Price Index (CPI)
- Wednesday: Mortgage Applications
- Thursday: Producer Price Index (PPI), Initial Jobless Claims
- Friday: Retail Sales, Industrial Production, Capacity Utilization
Technical Picture
Mortgage Bonds have been in an uptrend for months but are testing support at 101.76 for the seventh straight session; a break below could open ~20 bps of downside. The 10-year Treasury yield tested resistance at 4.29% on Friday, which continues to hold. Tomorrow’s CPI likely sets near-term direction for both MBS and Treasuries.
Outlook: Begin the day floating.
