Vital Statistics:
| Last | Change | |
| S&P futures | 4,307 | -10.2 |
| Oil (WTI) | 88.12 | 1.53 |
| 10 year government bond yield | 1.83% | |
| 30 year fixed rate mortgage | 3.77% |
Stocks are lower this morning on no real news. Bonds and MBS are flat.
Personal incomes rose 0.3% in December, according to the BEA. Consumption fell by 0.6%. The PCE inflation index rose 5.8% on the headline number, and 4.9% if you exclude food and energy. On the spending side, goods increased while services fell. This is consistent with the increase in COVID cases.
The Fed has a difficult line to walk here, with weak spending going into a tightening cycle. FWIW, as the US population generally ages, spending is going to decline as boomers have bought their last TVs, their last sofas, etc.
The employment cost index rose 1% in the fourth quarter as salaries rose 1.1% and benefits rose 0.9%. For the year, employment costs increased 4.4%. Rising employment costs will be a big driver of any wage-price spiral we might get. It isn’t a given that we see one, but if the labor shortages continue, and cost of living adjustments get baked into people’s expectations we might.
Origination activity declined in December, according to Black Knight. That said, cash-out refis are up for the year, as borrowers tap home equity to refinance expensive credit card debt. The purchase / refi mix was almost 50-50 in December.
The Daily Tearsheet 