With a Light Data Calendar this Week Impeachment Trial Takes Spotlight

Jan 21, 2020
U.S. Senate Floor

Impeachment Trial Drama Begins

This holiday-shortened week has a dearth of economic data so investors can spend more time focusing on the impeachment trial. Markets have largely ignored the impeachment proceedings as the hearings and votes took place in the U.S. House of Representatives, but now that the Articles have moved to the Senate, and the trial about to begin, attention will likely become heightened. While Majority Leader McConnell has expressed an unwillingness to allow witnesses and new documents, public sentiment is pushing in the other direction and if a majority of senators (meaning four Republicans join the Democrats) vote to allow witnesses the trial may become longer and more contentious than the early betting had it. While securing a two-thirds majority for conviction is still next to impossible, the introduction of witnesses will add intrigue and distraction for investors. Away from the trial, the December Leading Index (Thursday) and existing home sales (today) will be the highlights of a light week for economic news. 


Treasuries
Treasury Curve Today Week Change
3 Month 1.54% +0.01%
6 Month 1.55% +0.01%
1 Year 1.53% +0.01%
2 Year 1.54% -0.04%
3 Year 1.55% -0.04%
5 Year 1.59% -0.06%
10 Year 1.79% -0.05%
30 Year 2.25% -0.06%
Short-Term Rates
Fed Funds 1.75%
Prime Rate 4.75%
3 Mo LIBOR 1.82%
6 Mo LIBOR 1.84%
12 Mo LIBOR 1.92%
Swap Rates
3 Year 1.595%
5 Year 1.611%
10 Year 1.755%
Economic Calendar
Date Statistic For Briefing Forecast Market Expects Prior
Jan 22 MBA Mortgage Applications Jan 17 NA NA 30.2%
Jan 22 Chicago Fed National Activity Index Dec 0.15 0.15 0.56
Jan 22 FHFA Price Index MoM Nov 0.3% 0.3% 0.2%
Jan 22 Existing Home Sales MoM Dec 1.5% 1.5% -1.7%
Jan 22 Existing Home Sales (Annualized) Dec 5.43m 5.43m 5.35m
Jan 23 Leading Index Dec -0.2% -0.2% 0.0%
Jan 23 KC Fed Manuf. Activity Index Jan

NA

NA -8
Jan 24 Markit Services PMI Jan P 52.5 52.5 52.8
Jan 24 Markit Manufacturing PMI Jan P 52.6 52.6 52.4

calendar icon Top 5 Events for the Week

January 21-24, 2020

1. Impeachment Trial Begins – All Week
2. December Leading Index – Thursday
3. December  Existing Home Sales – Tuesday
4. January MBA Mortgage Applications – Tuesday
5. January Markit PMI’s – Friday

 

1.  Impeachment Trial Begins – All Week

Investors and markets have largely ignored the impeachment proceedings as the hearings and votes took in place in the U.S. House of Representatives, but now that the Articles have been moved to the Senate, and the trial about to begin, attention will likely become heightened. While Majority Leader McConnell has been against allowing witnesses and new documents, public sentiment is pushing in that direction and if a majority of senators vote for witnesses the trial may become longer, and more contentious than the early betting had it. While securing a two-thirds majority for conviction is still next to impossible, the introduction of witnesses and new documents will add intrigue and distraction to investors.

 

2.  December Leading Index – Thursday

The Conference Board’s Leading Indicators Index is a compilation of metrics that tend to foretell economic direction, and it is particularly useful as a predictor of recessions. The index always falls well below zero prior to a recession and earlier in the year the index was flirting with the zero-level and printed a –0.3 in June. The index, however, rebounded later in the summer and would need to move below -1.0 to provide a reliable recession signal. That being said, the December number is expected to fall to -0.2 versus November’s 0.0. If the index matches expectations it will be a signal that the economy continues to slow with some flirtation with early-stage recession signals.

 

Leading Index & Recessions

 

3.  December Existing Home Sales – Tuesday

After last Friday’s housing starts number was the largest in 13 years it put renewed focus on housing as a potential source of GDP growth for 2020. The warmer weather no doubt played a roll in pulling forward some starts and the always volatile multi-family starts were up too adding to the blow-out number. Permits, however, were right in range and point to a more subdued rate of starts after the weather-related bump in December. Be that it may, existing home sales constitute 90% of housing activity and as such the December numbers are expected to be slightly better than November. For the month, sales are expected up 1.5% to 5.43 million (annualized) versus 5.35 million in November. The average over the past year has been 5.30 million so a beat on both the  annual average and sequential points to positive momentum in the sector, but perhaps not to the extent exhibited in the recent housing starts number.

 

4.  January MBA Mortgage Applications – Wednesday

Including this weekly data series in our Top 5 list speaks to two things: (1) the relative dearth of economic  releases this week and, (2) curiosity over whether the bump in refinance applications can add to the spike that occurred the prior week. In that week, refinance applications spiked to a level higher than anything experienced in 2019, even though mortgage rates haven’t moved materially lower in recent months. Perhaps homeowners were waiting until the holidays passed and the new year to begin the refi process. In any event, if last week’s spike is repeated it will mean another coming wave of prepayments on loans with 2018 and early 2019 vintage.

 

5.  January Markit PMI Readings – Friday

The Markit Series of Service and Manufacturing PMI readings isn’t nearly as famous as the ISM series but they do provide an early tell on business activity in January while focusing more on smaller businesses. For January the Services PMI is expected to be 52.5 versus 52.8 in December. As in the ISM series, the 50-level divides expanding sectors from contracting sectors. The manufacturing PMI is expected to be 52.6 versus 52.4. While the ISM Manufacturing sector has been under 50 for nearly half a year, as we mentioned the Markit series incorporates more smaller sized firms and they have been less impacted by the trade war with China. In summary, the Markit series is looking for decent growth in both the services and manufacturing sectors for January.

 


bar graph icon  Yield/Duration Matrix

 Yield/Duration Relationship 

CenterState Disclosure

 


 

Tom Fitzgerald Signature 

Thomas R. Fitzgerald

Director, Strategy & Research

Tfitzgerald@centerstatebank.com

 

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