Markets are trading with a
dovish tone today as investors digest overnight headlines and position ahead of
key data later this week. The S&P 500 is higher, while Treasury yields have
fallen, reflecting expectations for a December Fed cut. Futures pricing
suggests a near-certainty of easing, framed as a “risk management” move amid
soft labor trends and muted inflation signals. Liquidity remains thin,
amplifying intraday volatility.
Mortgages continue to ease,
with the current coupon UMBS up 3-4 ticks on the day. This trend aligns with
market expectations for Fed policy normalization into 2026. Lock activity has
picked up sharply—up 33% month-over-month—as borrowers position for potential
rate relief. Refinance appetite is building, though still contingent on
sustained rate compression.
Bloomberg reports underscore
the political backdrop influencing markets: Trump signaled a Fed Chair pick
“early next year,” praising Kevin Hassett as a contender, while geopolitical
developments remain fluid with U.S. envoys engaging on Ukraine peace talks.
These headlines reinforce the narrative of policy uncertainty and potential
leadership shifts at the Fed, adding complexity to rate forecasts. Inflation
nowcasts hover near 2.9% YoY, but tariff-driven price pressures and labor
softness remain key risks.
