Vital Statistics:
Stocks are flattish this morning after the Trump Administration delayed tariffs on Mexico and Canada for 30 days. Bonds and MBS are down.
The tariffs on Mexico and Canada have been delayed 30 days after both countries made some concessions. Meanwhile, China has apparently instituted some tariffs on the US. Given that China is in the midst of a burst real estate bubble, this probably just increases the price of stuff they aren’t buying in the first place.
Stocks sold off in early trading on Monday, and the 10 year bond yield pushed down towards 4.5%. After Mexico’s tariffs were delayed by 30 days, markets recovered most of the losses, with only tech stocks down substantially.
Trump fired CFPB head Rohit Chopra and appointed Treasury Secretary Scott Bessent as Interim Head. Bessent’s first action was to suspend everything the CFPB is doing. The agency will suspend the effective dates for all rules that have yet to go into effect, pause all litigation (they are only allowed to file for continuances) and stop rule-making. They also were told to cease public comment.
Manufacturing activity increased in January after 26 straight months of contraction, according to the ISM Manufacturing Survey. New orders, production and employment all increased markedly. “Demand and production improved; and employment expanded. However, staff reductions continued with many companies, but at weaker rates. Prices growth was moderate, indicating that further growth will put additional pressure on prices. As predicted, maintaining a slower rate of price increases as demand returns will be a major challenge for 2025. Forty-three percent of manufacturing gross domestic product (GDP) contracted in January, down from 52 percent in December. The share of manufacturing sector GDP registering a composite PMI® calculation at or below 45 percent (a good barometer of overall manufacturing weakness) was 8 percent in January, a dramatic 41-percentage point improvement compared to the 49 percent reported in December.”
Susan Collins and Ralph Bostic said the Fed is in wait and see mode, and any further rate cuts might not be coming for a while. “In my view … it’s really appropriate for policy to be patient, careful and there’s no urgency for making additional adjustments, especially given all of the uncertainty,” said Boston Fed President Susan Collins in an interview with CNBC. “Depending on what the data are, it might mean we are waiting for awhile,” [Atlanta Fed President] Bostic said.
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