Vital Statistics:
Stocks are higher this morning after the consumer price index came in better than expected. Bonds and MBS are down.
Prices at the consumer level rose 0.2% MOM in February. If you strip out food and energy, prices rose 0.2%. Both monthly numbers were below Street expectations. The headline and core rates 2.8% and 3.1% YOY, which were below expectations as well.
Shelter inflation rose 0.3% MOM and accounted for half the increase in the CPI. Shelter rose 0.3% MOM and 4.2% YOY. Shelter inflation was 4.4% YOY in January, so we are still seeing improvement in this issue. Pre-pandemic, shelter inflation was running at 3.4% YOY and the index peaked at 8.2% annual growth in 2023.
We have recouped about 83% of the spike in shelter inflation and are close to pre-pandemic levels.
Job openings rose to 7.74 million in January, according to the JOLTS jobs report. The Street was looking for 7.5 million, so this number was better than expected. The quits rate edged up to 2.1%. The data for this report pre-dates the DOGE actions, so it probably overstates the strength of the labor market.
Mortgage applications rose 11.2% last week as purchases rose 7.2% and refis rose 16%. “Mortgage rates declined for the sixth consecutive week, with the 30-year fixed rate dropping to 6.67%, the lowest level since October 2024,” said Joel Kan. “As we enter the spring homebuying season, activity was up across all loan categories. Government purchase applications experienced an 11% increase – helped by the FHA rate dropping to 6.34%. Additionally, average loan sizes were higher, with the purchase loan amount hitting $460,800, the highest in the survey dating back to 1990,” Kan added.
Mortgage lock volume increased 28% in February, according to MCT. Much of this was the normal seasonal expansion. Andrew Rhodes, Senior Director and Head of Trading at MCT, shared his perspective on the current financial landscape: “The expectation is that the Federal Reserve will likely hold the line on rates in March and May, with markets anticipating a likely rate cut in June. Economic performance given impending tariffs, Nonfarm Payroll, and the Consumer Price Index (CPI) will continue to be the biggest factors influencing rate decisions as we move into the summer months.”
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