CPI, inflation at the consumer level, hit the tape unchanged on the “headline” number and up .3% on the core index (ex-food and energy).  The print was close to expectations with the core level just a touch higher than predicted.  Within the numbers:

  • energy fell 2.4% (should reverse next month due to oil prices), 
  • food prices fell .2%, 
  • tobacco prices and personal services jumped 2.6%, 
  • and real average weekly earnings rose .1%.  

Overall, not a bad report which reflects little inflation and no deflation.  Also on the wire, Empire State (New York) Manufacturing Index improved but still posted a loss of minus 4.5 points.  While conditions in that region are still worsening, the pace is beginning to slow. Industrial Production/ Capacity Utilization were also released, down .5% IP and 69.1% Cap U.  Nothing in this report tells us that the economy is on fire. 

Last but not least, the Michigan Sentiment Survey rose 2.8 points to 67.9.  Consumer expectations drove the number higher but the index of current conditions fell 2.1 points, giving us a mixed bag type of read on the consumer. 

Given the high profile data this week, mortgage pricing and note yields have done well.  Currently, the 10 year note is off 11/32’s (yield 3.15%), mortgage backs down 4/32’s, and stocks off 52 on the big board.  Technically, the chart has started to project a more neutral trade, especially if we can close at or below the 3.15% yield mark.  Stocks grinding sideways and luke warm economic data support our fixed income market being at or near “value”.  Keep in mind that this market is very tricky, trading on anything it gets its hands on so don’t fall asleep at the wheel.  Have a great weekend.