Market Matters

This was a pretty light week in terms of economic data, although we did have an extremely hot CPI number, with inflation at 7.9% YoY and the U.S. economy seeing the highest rate of inflation in 40 years. This week we saw relatively small progress in the war between Russia and Ukraine, although we saw oil prices climb as high as $130 a barrel. This was a blackout week for the Fed, and we have the FOMC meeting next week. The market is expecting a 25-bps rate hike. Looking at the Fed hiking cycle for the year, we will receive more information next week, but it is safe to expect at least a hike a quarter, also assuming we will have a hike in May, which is considered an off meeting. Best to be defensive here, as this has been a very volatile market.

 

Initial Jobless Claims

Jobless claims rose 11k to 227k for the week ending March 5th from a revised 216k in the prior week (orig. 215k). The 4-week moving average of headline claims was mostly unchanged at 231.3k. Continuing claims, which lag by a week, rose to 1.494mln from a revised 1.469mln (orig. 1.476mln) for the week of February 28th. Overall, headline claims are modestly above the normal levels pre-pandemic of ~215k, while continuing claims remain significantly lower vs. the prior normal level of ~1.7mln.

 

Consumer Price Index

CPI for February rose .8% on headline, and the ex-food/energy core was up .5%. Looking YoY, the headline print now sits at 7.9% from a prior 7.5%, while the core measure rose from 6.0% to 6.4%. Within the data, the jump in energy made a large contribution of 3.5% with big increases in gasoline ( 6.6%) and fuel oil ( 7.7%). Food prices were up 1.0% overall, and that is the largest increase since April 2020. Food at home prices were up 1.4% while food away from home was up .4%. Prices all together were as expected, and market consensus says they are only going to get worse as the effects of the war in Eastern Europe start to really set in, especially with energy and commodities. Expectations are now that inflation levels could see as high as 9-10% in the coming months.

 

MBA Mortgage Applications

The MBA weekly mortgage applications index increased by 8.5% for the week ending March 4th. Purchase applications increased by 8.6% and were -7.0% lower than the same week last year. Refinance applications rose by 8.5% and were -50% lower vs. the same week a year ago. "Mortgage rates dropped for the first time in 12 weeks, as the war in Ukraine spurred an investor flight to quality, which pushed U.S. Treasury yields lower. A 6-basis-point decline in the 30-year fixed-rate mortgage led to a slight rebound in total refinance activity, with a larger gain in government refinances. Looking ahead, the potential for higher inflation amidst disruptions in oil and other commodity flows will likely lead to a period of volatility in rates as these effects work against each other," said Joel Kan, MBA's Associate Vice President of Economic and Industry Forecasting. "Purchase activity also increased, as prospective buyers acted on lower rates and the early start of the spring buying season. The average loan size remained close to record highs, with higher-balance loan applications continuing to dominate growth."

 

JOLTS Report

The Job Openings and Labor Turnover Survey (JOLTS) showed job openings in January at 11.263mln, while December's print saw a strong positive revision to 11.448mln (orig. 10.925mln). Given this, the job openings rate actually ticked down to 7.0% from 7.1%. Within the data, hires were up 7k to 6.457mln, while the number of quits dropped from 4.403mln to 4.252mln. This put the quits rate down by -.2% to 2.8%, while the prior two months' readings have been record highs.