Morning Report: Good numbers on inflation

Vital Statistics:

S&P futures4,09313.50
Oil (WTI)74.910.54
10 year government bond yield 3.54%
30 year fixed rate mortgage 6.44%

Stocks are higher this morning as we put Q1 into the books. Bonds and MBS are flat.

Personal incomes rose 0.3% in February, according to the BEA. Personal consumption expenditures rose 0.2%.

The Personal Consumption Expenditures Price Index – the Fed’s preferred measure of inflation rose 0.3% month-over-month and 5% year-over-year. Excluding food and energy, the core rate 0.3% MOM and 4.6% YOY.

It looks like the spike in the PCE index in January may have been a one-off, or perhaps a some sort of statistical anomaly. It looks like the January numbers on just about every stat were out of step with the previous and subsequent readings. Q1 seasonal adjustments have always been imperfect (there has been a persistent bias in lower Q1 GDP) and that may have played a part in the January readings.

Regardless, the increase in the month-over-month rate seems to be limited to January and we are back in a period of declining month-over-month inflation. The year-over-year numbers are declining as well and will continue to fall especially as we approach the high water mark for 2022 real estate prices in the summer. This is good news as it takes some of the pressure of the Fed to keep raising rates.

The Spring Selling Season is looking like a bust, at least according to data from NAR. Part of the reason is that homes are taking a longer time to sell. Days on market rose to 54 this year compared to 36 a year ago. Higher rates are impacting demand, and if a home is priced right it will move. “Amid fewer new choices on the market and still rising home prices, home shoppers have shown that they are very rate sensitive, only jumping back in the market when rates dip, and so what happens with rates this spring will likely play a strong role in determining whether the housing market bumps along or picks up speed this year,” said Danielle Hale, chief economist at

Overall, the competition is lower these days, however this is a function of affordability problems, not due to a balanced market. Median listing prices are still up on a year-over-year basis.

The FDIC is looking to sell Silicon Valley Bank and Signature’s portfolio of underwater MBS are Treasuries. The banks who took parts of these banks had no interest in these bonds as they would have to realize losses on the portfolios. The bond portfolios total about $116 billion.

Consumer sentiment fell in March, according to the University of Michigan Consumer Sentiment Survey. Both the current situation and expectations numbers fell.

Most notably, the year-ahead inflationary expectations index fell from 4.1% to 3.6%, while the long-term expectations were flat at 2.9%.

“Consumer sentiment fell for the first time in four months, dropping about 8% below February but remaining 4% above a year ago. This month’s turmoil in the banking sector had limited impact on consumer sentiment, which was already exhibiting downward momentum prior to the collapse of Silicon Valley Bank. Overall, our data revealed multiple signs that consumers increasingly expect a recession ahead. While sentiment fell across all demographic groups, the declines were sharpest for lower-income, less-educated, and younger consumers, as well as consumers with the top tercile of stock holdings. All five index components declined this month, led by a notably sharp weakening in one-year business conditions.”


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

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