Market Matters

We discussed the 10-year touching 1.186% last week and we now see it has traded up to that level, although technically the highest today so far is 1.1965% on the 10-year. We have been in a sideways trade since early January from 0.99 to 1.19 on the 10-year, while also maintaining the upward channel in the 10-year. With the upcoming shortened holiday week, it wouldn’t be surprising if we come back on Tuesday with the 10-year lower. Things still feel risky with the trend not in our favor and some sort of stimulus passed by the end of February.

 

Initial Jobless Claims

Initial Jobless Claims fell by -19k to 793k for the week ending February 6th vs. the prior week’s upwardly revised print of 812k (orig. 779k). Continuing claims, which lag a week, fell -145K to 4.545mln from a previous 4.69mln, hitting the lowest level since March 21st. Continuing claims are now down -20.4mln from the peak reached during the week of May 9th, and have fallen in each week but 4 since July 18th. Over that time, they have fallen a total of 12.4mln.

 

Consumer Price Index

CPI for January posted up +.3%, with the core (ex-food/energy) unchanged from the prior month. Looking at a YoY basis, headline CPI remained at +1.4%, while the core fell -.2% to +1.4%. Concerning the monthly headline number, the driving force in the overall increase was a +7.3% jump in energy commodities, including +7.4% increase in gasoline, and a +5.4% rise in fuel oil. Energy utilities fell on the month, down -.3%, while food prices were weaker, only up +.1%. Within the core measure, apparel prices rose +2.2%, but are still down -2.5% annually. Medical care services were also positive, up +.5%, with shelter up +.1%, and commodities up +.1%. Weaker readings were also seen in public transport, down -1.7%, new vehicles down -.5%, used vehicles down -.9%, with recreation down -.6%. Overall a tame report, as there are still no signs of sustainable inflation pressures coming from the data, none of which are even close to the Fed’s mandate.

 

University of Michigan Consumer Sentiment

February’s pre-lim read on the University of Michigan’s Consumer Sentiment Index posted at 76.2, a drop of -3.8 points from the final read for January. The expectations index fell by -4.2 points to 69.8, now sitting at its lowest levels since the start of the pandemic. The current conditions index also weakened, down -.5 point to 86.2. When looking at inflation, expectations for 1yr ahead rose +.3% to 3.3%, while the 5yr outlook held steady at 2.7%. The 5yr inflation expectation has not been above 2.7% since July 2015.

 

NFIB Small Business Optimism Index

The NFIB Small Business Optimism Index fell by -.9 points to 95.0 in January, which is the third straight monthly decline and the lowest index value since May 2020 at 94.4. Those owners expecting better business conditions over the next 6 months fell by -7.0 points to a net -23%, the lowest level since November 2013 (-25%). Sales expectations for the next 3 months declined by -2.0 points to a net -6%, while earnings trends also fell, down -2.0 points to a net -16%. The NFIB's Chief Economist Bill Dunkelberg said, "The COVID-19 pandemic continues to dictate how small businesses operate and owners are worried about future business conditions and sales." He added that, “As Congress debates another stimulus package, small employers welcome any additional relief that will provide a powerful fiscal boost as their expectations for the future are uncertain.”