MBS prices are up about 16/32 this morning while the DOW is up about 600 points as high hopes for bank earnings paid off and a crucial consumer inflation update showed prices increased less than expected in December. Total CPI increased 0.4% month-over-month in December. That was a tad higher than the Briefing.com consensus estimate, but in-line with consensus estimates seen elsewhere. Core CPI, which excludes food and energy, jumped 0.2% month-over-month, which was in-line with the Briefing.com consensus estimate and slightly better than the consensus estimates seen elsewhere. On a year-over-year basis, total CPI was up 2.9% versus 2.7% in November while core CPI was up 3.2% versus 3.3% in November. The key takeaway from the report for a market worried about inflation heating up again is that these results were better than feared which, at first blush, shrouded the reality that the consumer inflation rate is still running well above the Fed’s 2% target.

MBS prices are down about 4/32 this morning while the DOW is down about 30 points as investors took in the first of two key inflation reports this week, which showed prices rose less than expected in December. The Producer Price Index for final demand increased 0.2% month-over-month in December (Briefing.com consensus 0.3%), leaving it up 3.3% year-over-year versus 3.0% in November. Excluding food and energy, the index for final demand was unchanged month-over-month (Briefing.com consensus 0.2%), leaving it up 3.5% year-over-year versus 3.5% in November. The key takeaway from the report is that the better-than-expected monthly readings have been clouded by the less inspiring year-over-year readings, as well as the understanding that inflation at the wholesale level moved in the wrong direction in 2024 (versus 2023) and remains elevated relative to the Fed’s 2% inflation target.

MBS prices are down about 4/32 this morning while the DOW is up about 230 points amid fading hopes for interest rate cuts ahead of this week’s key consumer inflation report. Stocks are shaping up for another rough session (nasdaq and S&P are down) after Friday’s plunge, which wiped out all year-to-date gains for Wall Street’s major gauges. A hot December jobs report rattled markets, spurring concern that signs of strength in the economy will encourage the Federal Reserve to keep rates higher for longer. The 10-year Treasury yield added to recent gains to touch a 14-month high, trading near 4.8% as US bonds sold off. Meanwhile, the dollar surged to a two-year high against major currency peers, with the UK pound, in particular, coming under pressure. As of this morning, traders are betting there will be no rate cut until at least September, per the CME FedWatch tool.

MBS prices are down about 12/32 this morning while the DOW is down about 600 points as investors digested a final 2024 jobs report that blew past expectations on hiring, raising more uncertainty about the path of interest rates this year. The December employment report was quite good (all things considered). Nonfarm payrolls increased by a stronger-than-expected 256,000, the unemployment rate slipped to 4.1% from 4.2%, average hourly earnings growth year-over-year was a sturdy 3.9%, and more people were employed. The key takeaway from the report for the market is that it was perhaps too good, which makes it think one of two things, if not both: the Fed may have made a mistake cutting rates as aggressively as it did at the end of 2024, thereby fueling the prospect of sticky inflation because the labor market is still strong, and there isn’t going to be another rate cut for an extended period.

MBS prices are down about 2/32 this morning while the DOW is closed in honor of the national day of mourning following the passing of former President Jimmy Carter. The bond markets will close early at 11 a.m. PT. Trading will resume as normal tomorrow. Looking ahead to tomorrow’s Nonfarm payrolls report, the US is expected to add 155K jobs in December, while the Unemployment Rate is anticipated to hold steady at 4.2% during the same period. With that said, evidence of a strong labor market may generate a bullish reaction in the US Dollar as it puts pressure on the Federal Reserve to pause its rate-cutting cycle, but a weaker-than-expected NFP report may produce headwinds for the Greenback as it fuels speculation for lower US interest rates. Mortgage applications in the US fell by 3.7% from the previous week in the period ending January 3, stretching the 12.6% plunge in earlier period, according to data compiled by the Mortgage Bankers Association.