Market Update for January 13th 2025

1. Stock & Bond Markets

• Stocks: Generally lower to start the new week, largely because investors worry that higher interest rates (see “Treasury Yields” below) will weigh on company earnings.

• Mortgage Bonds: Also trading lower. When bond prices fall, mortgage rates often rise, so this can make borrowing costs more expensive if you’re looking for a home loan.

2. Treasury Yields & Interest Rates

• The 10-year Treasury yield—a key indicator for long-term interest rates—has moved above 4.735% (an important “resistance” level) and is now hovering around 4.75%.

  • If it pushes even higher (toward 4.84% or above), many analysts believe it could reach 5%, a level last seen in October of last year.

• Why This Matters: Higher Treasury yields often lead to higher mortgage rates and can make business borrowing more expensive. This can slow down the economy over time.

3. Oil & Inflation Concerns

• Oil Prices: Currently at their highest level since October—WTI (West Texas Intermediate) crude around $78–$79 per barrel.

• Why the Increase: New sanctions on Russian oil and gas imposed by the Biden administration have tightened supply. Higher oil prices can contribute to rising inflation because energy costs affect almost everything else in the economy (think: transportation, heating, production, etc.).

4. Jobs Report vs. Consumer Sentiment

• Recent Jobs Report: Showed the unemployment rate falling from 4.2% down to 4.1%, suggesting the labor market is quite strong.

• Consumer Surveys: However, the University of Michigan’s survey found that more people (around 50%) expect unemployment to rise in the coming year than at any time since early 2020.

  • Why the Disconnect? Sometimes official job data are revised down later, and consumer worries may reflect headlines about future layoffs or economic uncertainty.

5. Upcoming Economic Data

1. Producer Price Index (PPI) – Tuesday

   • Measures the cost of goods at the wholesale level. Expected to rise about 0.3% for December, pushing annual wholesale inflation from roughly 3% to 3.4%.

2. Consumer Price Index (CPI) – Wednesday

   • The most closely watched inflation number. Headline CPI is also forecast to rise 0.3% in December, which would lift yearly inflation from about 2.7% to 2.8%.

   • The “core” figure (excluding food and energy) is expected around 0.2% month-over-month, staying around 3.3% annually.

3. Retail Sales, Jobless Claims, Housing Data – Thursday & Friday

   • These will show how consumers are spending and whether the housing market is gaining or losing momentum.

6. Why It All Matters

• If Inflation Rises Faster: The Federal Reserve might keep interest rates higher for longer to cool things down—leading to higher mortgage rates and borrowing costs.

• If Inflation Eases: Bond prices may improve (yields could fall), helping mortgage rates and possibly giving the stock market a boost.

• Potential Job Revisions: Analysts point out that government job numbers sometimes get revised downward months later (via data from the QCEW). If that happens, it could reinforce the idea that the economy is not quite as hot as the initial reports suggest.

7. What to Watch Moving Forward

• Inflation Updates: This week’s PPI and CPI reports will be critical. Even a small surprise (higher or lower than expected) can shift market sentiment significantly.

• Bond Market “Floors” & “Ceilings”: Mortgage bonds are testing lower “support levels,” meaning prices have little room to fall before possibly triggering a bigger sell-off. Meanwhile, the 10-year yield is testing an upper “resistance” zone that could pave the way to 5%.

• Consumer Confidence vs. Reality: Though jobs data looks strong, consumer expectations are more cautious, hinting the economy could slow in the future.

Bottom Line

• Markets are nervous about higher interest rates and renewed inflation risks from rising oil prices.

• Investors are juggling conflicting signals: official reports show strong job growth, yet consumer surveys predict tougher times ahead.

• This Week’s Data on inflation (PPI, CPI) and spending (Retail Sales) will likely influence mortgage rates, Fed decisions, and overall market direction in the days to come.

If you’re new to watching these indicators, keep in mind that higher yields and lower bond prices can translate into increased interest rates for home loans and other types of credit. Meanwhile, inflation data this week could sway the Federal Reserve’s outlook—and markets—one way or the other.