In today’s economic news…..Housing starts climbed higher in January to 596k from a revised lower level of 520k in the month of December. The increase of 14.6% was said to be fueled by a rise in multi-family starts which rose by 78%. On the other hand, building permits for the month dropped 10.4%. PPI rose 0.8% month over month in January, which was in line with most economists’ expectations. This was the seventh consecutive monthly increase in producer prices. Core prices(ex- food and energy costs) rose 0.5% month over month, which was the largest monthly gain since 2008. Food prices rose 0.3% while energy prices rose 1.8%. Investor anxiety over inflation pressures has increased recently on global food and commodities price increases, even though inflation in the U.S. has remained relatively tame. Today's economic reports have caused a stir in the market about whether signs of continued growth in the economy may push the Fed to start removing monetary stimulus to keep inflation under control. Speculation now is that the Fed will start raising rates as early as this December. In other news, Industrial production posted a decline of .1%, well below expectations of a .5% increase. A decline in utilities as milder temperatures curbed demand for heating looks to be the reason for the decline. Finally, the MBA mortgage application index has fallen from 897 in October to 420, a drop of around 53%. During that period, refinance applications have now fallen 64%, and purchase applications have dropped by 11%. As you would expect, mortgage applications continue to drop as the recent rise in interest rates have made purchases and refinances less appealing. Treasuries have continued to cut some of their losses in the last few trading days with the 10-year trading from 3.75% on February 8th down to 3.59% this morning. The bearish trend has been neutralized and the market still looks to do better in the short term. Resistance lies around 118-30 (3.58%) to 119-04(3.55%), with support coming in around 117-26(3.72%) to 117-15(3.76%). Stocks are up 50 points or so on the DOW, along with Mtg backs currently down a couple of ticks.
Joe Webb
VP Trading, Pipeline Management
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900
Dallas, Texas 75252
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