10-year note: Currently net short 117.9k, up 28.6k.(Futures Only).
Tuesday, a two-day FOMC meeting begins. This is the year’s first, and will be Janet Yellen’s, the outgoing chair, last. (The FOMC meets eight times a year.)
The next one is on March 20-21, and this one comes with a press conference by the chair. Jerome Powell is replacing Ms. Yellen.
In the futures market, the likelihood of a hike next week is almost non-existent. In all probability, there is not going to be much change in the language as well. The dot plot expects three hikes this year.
More interesting will be the March meeting. Futures have priced in 77-percent odds of a 25-basis-point rise in that meeting. Importantly, would the Powell-led FOMC continue the status quo or chart a different path – regardless hawkish or dovish? Markets currently expect only two hikes this year.
10-year note: Currently net short 145.1k.
30-year bond: Currently net long 55.7k, down 11.4k.(Futures Only).
Major economic releases next week are as follows.
Personal income for December is due out Monday. In the 12 months to November, core PCE rose 1.48 percent. This is the Fed’s favorite measure of consumer inflation, and has remained sub-two percent since May 2012.
Tuesday, the S&P Corelogic Case-Shiller home price index for November comes out. Nationally, home prices in October rose 6.2 percent year-over-year. This was the highest growth rate since June 2014. Prices have risen every month since May 2012.
Wednesday brings the employment cost index (4Q17) and the pending home sales index (December).
Compensation costs for private-industry workers increased 2.5 percent in the 12 months to September last year. While still subdued, this was the fastest growth in 10 quarters.
Pending home sales in November inched up two-tenths of a point month-over-month to 109.5. The cycle high 113.6 was reached in April 2016.
Labor productivity (4Q17, preliminary) and the ISM manufacturing index (January) are due out Thursday.
Non-farm output per hour increased 1.46 percent y/y in 3Q17. This was the highest growth rate in nine quarters. Productivity remains subdued.
Manufacturing activity rose 1.5 points m/m in December to 59.7, not too far away from September’s 60.8, which was the highest since May 2004.
Employment (January), the University of Michigan’s consumer sentiment (January, final), and durable goods (December, revised) are scheduled for Friday.
The economy only added 148,000 non-farm jobs in December. In all of 2017, the monthly average was 171,000, versus 187,000 in 2016, 226,000 in 2015 and 250,000 in 2014.
Preliminarily, consumer sentiment fell 1.5 points m/m in January to 94.4. October’s 100.7 was the highest since January 2004.
December orders for non-defense capital goods ex-aircraft – proxy for business capital expenditures – rose 8.4 percent y/y to $67.1 billion (SAAR). They fell 0.3 percent m/m. Orders peaked in September 2014 at $70.3 billion and have risen since bottoming in May 2016 at $59.9 billion.
30-year bond: Currently net long 103.4k.
Crude oil: Currently net long 781.5k, down 5k.(Futures Only).
Spot West Texas Intermediate crude ($66.14/barrel) continued higher, before drawing sellers after hitting $66.66, leaving behind a long wick.
The bears have work to do, however. Nearest support lies at $65, which was defended Friday, then $62, and after that $59.
The EIA report for the week of January 19 showed that U.S. crude production increased 128,000 barrels per day to 9.89 million b/d – a new record.
Crude imports rose as well – by 91,000 b/d to eight mb/d. This was a 13-week high.
Refinery utilization fell 2.1 percentage points to 90.9 percent. The 96.7-percent reading three weeks ago was the highest since August 2005.
Gasoline and distillate stocks rose 3.1 million barrels to 244 million barrels and 639,000 barrels to 139.8 million barrels, respectively.
Crude stocks, however, dropped 1.1 million barrels to 411.6 million barrels – the lowest since February 2015.
Crude oil: Currently net long 75.1k.
E-mini S&P 500: Currently net long 166.5k, up 44k.(Futures Only).
The crowd is jumping on board.
In the week through Wednesday, U.S.-based equity funds (including ETFs) took in $23.4 billion. This followed inflows of $36.8 billion in the prior four (courtesy of Lipper).
In the same week, $13.7 billion went into SPY (SPDR S&P 500 ETF), while VOO (Vanguard S&P 500 ETF) attracted $657 million. IVV (iShares core S&P 500 ETF), however, lost $126 million (courtesy of ETF.com).