10-Year Treasury Yield
Treasury yields were mixed Monday as investors looked ahead to a week filled with Federal Reserve speaker remarks and key economic data releases, including October’s consumer inflation report. The policy-sensitive 2-year Treasury was last trading at around 4.69%, having risen by nearly four basis points. It had notched a fresh 15-year high, climbing as high as 4.883%, on Friday. The yield on the benchmark 10-year Treasury note was last down two basis points to 4.138%. Yields and prices move in opposite directions. One basis point is equivalent to 0.01%.
China China’s exports fell by 0.3% in October from a year ago, missing Reuters expectations for a 4.3% increase. The decline in U.S.-dollar terms last month marked a sharp decline from a 5.7% year-on-year increase in September, and the first year-on-year drop since May 2020, according to Refinitiv Eikon data. Imports fell in October by 0.7% in U.S.-dollar terms, also missing expectations for slight growth of 0.1% and down from a 0.3% increase in September. China’s trade with countries and regions was only available in yuan terms on a year-to-date basis as of Monday morning. The U.S. remained China’s largest trading partner on a single-country basis, the data showed. For the year through October, Chinese exports to the U.S. slowed to an 8.4% pace, down from 10.1% recorded as of September. Imports from the U.S. grew by 1.7% as of October, faster than the prior month’s 1.3% pace.
Midterm Elections
It is a fact of American politics that the party in the White House struggles in the congressional races held every two years between presidential contests.Midterm elections on Tuesday could hamstring the Democratic president with a Republican-controlled Congress, and opinion polls and public sentiment surveys suggest that a gloomy mood around economic issues is pushing voters in that direction. Republicans have made the economy their No. 1 issue, and accuse Biden and Democrats of fueling inflation with major spending packages and then ignoring the economic plight of American families faced with soaring energy and food prices. It is a fact of this moment that there is a roaring, real-time dissonance between the president's 40% approval rating and broader economic conditions that are at worst mixed - with high inflation top of mind for many but also one of the strongest jobs markets in decades and a 3.7% unemployment rate. Overall, the economy is expected to grow in 2022, albeit slowly, after concerns earlier in the year that it had begun to contract.
U.S. stock futures rose Monday as a packed week kicked off, with congressional midterm elections and key inflation data on deck over the next few days. Tuesday’s midterm election will determine which party will control Congress, and impact the direction of future spending. Democrats currently control the House, and have a majority in the Senate. ″ We think US equity investors would take a bullish cue from the historical playbook which indicates that stocks tend to experience above-trend gains of 13-14% on a median/average basis in years that have a Democratic President and a split or Republican Congress,” RBC’s Lori Calvasina wrote in a Monday note. “In other words, the conventional wisdom that the stock market likes political gridlock is supported by the historical data in this instance,” Calvasina wrote.
Midterm - Nest Day
It may take until December to know which political parties control both chambers of Congress after Tuesday’s midterm elections. But that does not mean your personal investment strategy should also stay up in the air. As uncertainty on the outcome of some key races looms, the coming results may not prompt big market reactions, according to Dan Egan, vice president of behavioral finance and investing at Betterment. “We still effectively have kind of a balanced government, which is actually something markets usually like,” Egan said.
MBA Purchase Applications
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Jobless Claims
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CPI
Consumer prices rose 0.4% in October, less than expected, as inflation eases. The consumer price index increased 0.4% for the month and 7.7% from a year ago, both lower than estimates. Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% on an annual basis, also lower than expectations. Prices declined for medical care services, used vehicles and apparel. Shelter costs posted their highest monthly gain since 1990. Markets soared on the report and Treasury yields tumbled. The consumer price index rose less than expected in October, an indication that while inflation is still a threat to the U.S. economy, pressures could be starting to cool. The index, a broad-based measure of goods and services costs, increased 0.4% for the month and 7.7% from a year ago, according to a Bureau of Labor Statistics release Thursday. Respective estimates from Dow Jones were for rises of 0.6% and 7.9%. Excluding volatile food and energy costs, so-called core CPI increased 0.3% for the month and 6.3% on an annual basis, compared with respective estimates of 0.5% and 6.5%. Markets reacted sharply to the report, with the Dow Jones Industrial Average up more than 1,000 points. Treasury yields fell sharply, with the policy-sensitive 2-year note tumbling 0.3 percentage point to 4.33%.
Friday
Stocks rose on Friday following lighter-than-expected October consumer price index data released the day prior that raised investors’ hopes the Federal Reserve will slow its pace of interest rate hikes. The benchmark S&P 500 ended its best week since June. The S&P 500 closed out its best week since June as a report on Thursday showing slowing inflation raised hopes that the Federal Reserve would soon slow its tightening campaign.Tech stocks on Friday shook off a decline in cryptocurrencies. Virtual currencies tumbled sharply this week and once again came under pressure Friday after FTX filed for bankruptcy protection, and CEO Sam Bankman-Fried resigned. Bitcoin and ether both declined. Treasury yields plunged Thursday on the back of the weaker-than-expected inflation print. The bond market was closed on Friday to observe Veterans Day.
Fixed Mortgage Rates
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