CPI, inflation at the consumer level, rose .4% headline in January while the core index (ex-food and energy) rose .2%. Speaking of hamburgers and gasoline, the two provided over two thirds of the increase in the headline number. Although inflation is showing trending action (increasing), the moves are nominal and well below the Fed’s target number of just under 2%. In other words, it’s not today’s worry. Weekly Unemployment Claims continued their volatile ways, jumping 25K to 410K. Looks like last week’s print in the 300 handle was all about the weather. Continuing Claims were also up 1K to 3.911 million. We see the labor market continuing to improve, albeit at a snail’s pace. LEI, leading economic indicators for January rose .1% following December’s .8% rise. 6 of 10 components improved led by interest rate spreads and a better stock market. Sloppy housing factors and weak labor markets provided the negative influence on the index. Last but not least was the Philly Fed Index which jumped to its highest level since 2004. Following December’s print of 19.3, the index rose to 35.9. Improvements in that region of the country were across the board including a 6 point gain in the employment component. Looks like Espo and our gang in Philly should be getting busy! Bonds, notes and mortgage backs are having a nice day. Currently, the 10 year note is right back against resistance at 3.58% (up 11/32’s), mortgage backs are plus 8/32’s, and stocks are up a dozen on the big board. We see the trade as a fear biased, flight to quality move due to geo-political concerns in the Mid East. The spreading effect (freedom fighters) out of Egypt and into surrounding countries coupled with Iranian war ships trying to get into the Suez Canal has many a trader walking on egg shells. With the data for the week in the rear view mirror (and for the most part neutral/bullish for bonds), the wire service will move the market on overseas headlines. Pay attention. For now, we’re back at the best levels in some time.
Scott Eggen
SVP, Capital Markets
PrimeLending, A PlainsCapital Company
18111 Preston Road, Suite 900Dallas, Texas 75252
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