Yesterday, the United States proposed a list of 10% tariffs on $200 Billion of imports from China into the U.S. This comes within days after China and the U.S. imposed $34 Billion worth of tariffs on each other. As a result, the rally in the US stock market has turned into a pull back in stocks, which is helping support mortgage bond pricing at current levels. As the trade battle heats up, we can expect to see volatility within the stock market. It seems to come in waves where stocks thrive on news of trade tensions easing and fall on news of escalations.
The Producer Price Index (PPI) report was released this morning, showing manufacturing prices increased by 0.3% in the last month. This was above the markets’ expectations of a 0.2% gain. On a year over year basis, the Headline number is up from 3.1% to 3.4%. That’s a big monthly jump and puts the PPI figure the highest it has been in 6.5 years.
Tomorrow we will receive an update on consumer inflation via the Consumer Price Index (CPI) report. Hopefully, the higher levels of wholesale inflation haven’t transferred over to the consumer level. It is comes in hotter than expectations, we can expect to see mortgage rate pricing move higher.
Bonds remain beneath a critical ceiling of resistance. We will maintain our locking bias.