Monday – January 9, 2023

UMBS up 19 bps early. 10y flat.

Stocks extended global gains in risk assets, driven by China’s reopening trade and expectations of slower rate hikes. The dollar weakened and oil rallied. The US December inflation report due Thursday will be front of mind for traders after last week’s jobs data failed to offer a clear picture, with unemployment at its lowest level in decades, while wage gains were weak.

December ISM has now dropped into “contraction” territory, dropping to 49.6 from 56.5. Other than COVID, first time below 50 since 12/09. New orders are at 45.2. One great line from the report “Orders from customers are softening, and some orders are being cancelled. WE have lost employees due to normal attrition and having issues backfilling positions. The supply chain is catching up…..”

Highlights for the week are Powell’s speech on Tuesday, 2 treasury auctions, CPI on Thu, and Sentiment on Friday

Another positive for inflation. Ocean shipping rates are down 80% from their peak in September. It may not have a massive effect of prices for consumers, but it certainly helps