What Happened Last Week?
Finally Cooling Off Just in Time to Heat Up Again
Much of last week was spent monitoring the “post-Fed correction”–a nominal pull-back in the impressive rate rally of the past several months following the Fed announcement. If you prefer “buy the rumor, sell the news” on the Fed rate cut, it’s the same thing. By the end of last week, the correction finally looked to have leveled off, even if it got a bit of help from cooperative econ data. The timing is frustrating for those looking to predict the future as this week brings an even more data-driven episode for bonds/rates. The not-so-frustrating thing is that the correction was never very large (downright small, even).
Source: Matthew Graham, Mortgage News Daily 9/27/2024)
What’s on the Agenda for This Week?
Three Things
The three areas that have the greatest ability to impact your backend pricing this week are: (1) The Talking Fed, (2) Jobs, Jobs, Jobs and (3) PMIs.
(1) The Talking Fed: There is a very busy Fed speak schedule that is kicked off this Monday with Fed Chair Powell.
- 09/30: Powell, Bowman
- 10/01: Bostic
- 10/02: Hammack, Musalem, Bowman and Barkin
- 10/03: Bostic, Kashkari
- 10/04: Williams
(2) Jobs, Jobs, Jobs: There is a ton of job and wage related data this week culminating in Big Jobs Friday. The bond market will be very sensitive to any weakness in the overall wage and/or job picture with: JOLTS, ADP, Challenger Job Cuts, Initial Weekly Jobless Claims, Non Farm Payrolls, Unemployment Rate, Average Hourly Earnings, U6 Underemployment Rate, Average Work Week Hours and Labor Force Participation Rate.
(3) PMIs: This week will be Chicago PMI and both ISM Manufacturing PMI and ISM Services PMI with the focus on the latter. Also in the same genre is Factory Orders and the final September flash PMI readings.
Market Wrap-up
Domestic Flavor
Rosie the Riveter: The September bellwether Chicago PMI remained in contractionary territory but it was better (less worse) than expected: 46.6 versus estimates of 46.2. The Dallas Fed’s regional Manufacturing Business Index was awful with a -9.0 versus estimates of -4.5.
On Deck for Tomorrow: Construction Spending, ISM Manufacturing and JOLTS.
The Talking Fed
In prepared remarks, Fed Chair Powell told the National Association for Business Economics, “Looking forward, if the economy evolves broadly as expected, policy will move over time toward a more neutral stance. But we are not on any preset course.” He added, “The risks are two-sided, and we will continue to make our decisions meeting by meeting.”