MBS prices are down about 6/32 this morning while the DOW is down about 150 points after the S&P 500 notched a record high amid deteriorating consumer sentiment. The preliminary reading for the University of Michigan Consumer Sentiment Index for August dropped to 51.0 (Briefing.com consensus: 54.5) from the final reading of 55.2 for July. In the same period a year ago, the index stood at 58.2. The key takeaway from the report is that only 8% of all consumers surveyed expect their income growth to exceed inflation in the year ahead. That expectation could ultimately translate into lower discretionary spending activity. Total retail sales declined 0.6% month-over-month in July (Briefing.com consensus: 0.2%) following a 0.2% increase in June. Excluding autos, retail sales declined 0.3% month-over-month (Briefing.com consensus: 0.2%) following a 0.2% decline in June. The key takeaway from the report is that control retail sales dropped 0.4% month-over-month. This figure will feed into GDP forecasts, so there is apt to be some downward revisions to Q3 GDP forecasts. With the boost from tax refunds likely behind us, a more moderate pace of spending appears reasonable to us over the second half of the year. Nevertheless, we expect consumer spending to remain stable through year-end, supported by healthy household balance sheets and low unemployment.

MBS prices are up about 10/32 this morning while the DOW is up about 200 points after another inflation reading that eased September rate-hike bets and a slew of earnings reports. Total PPI was unchanged month-over-month in July (Briefing.com consensus: 0.1%) following an upwardly revised 0.1% decline (from -0.3%) in June. Core PPI, which excludes food and energy, increased 0.2% month-over-month (Briefing.com consensus: 0.3%) following an upwardly revised 0.4% increase (from 0.2%) in June. Total PPI was up 4.7% year-over-year, down from 5.5% in June. Core PPI was up 4.2% year-over-year versus 4.7% in June. The key takeaway from the report is that, like the CPI, it was devoid of “new” inflation-baked surprises. Headline and core readings trended in the right direction of disinflation, which is an appeasement for today’s trading dynamic, but of course the inflation rates themselves remain on the high side and need to come down much more to appease inflation hawks. Following the PPI report, the probability of a 25-basis point rate hike at the September FOMC meeting has been reduced to 30.4% from 40.6% yesterday. Initial jobless claims for the week ending August 8 increased by 9,000 to 209,000 (Briefing.com consensus: 205,000). Continuing jobless claims for the week ending August 1 decreased by 22,000 to 1.777 million. The key takeaway from the report is the 4-week moving average for initial claims running below 200,000 (currently 199,000), which is an historically low number consistent with a labor market that is light on layoff activity. One key inflation input — oil prices — fell today as President Trump pivots from an active military campaign to one focused on economic pressure. The Trump administration has stated that the US retains “total control” over the Strait of Hormuz, disputing private data showing low shipping traffic.

MBS prices are up about 4/32 this morning while the DOW down about 30 points as investors assessed easing inflation data, which is likely to keep Federal Reserve officials divided on whether to raise interest rates. Total CPI was up 0.1% month-over-month in July (Briefing.com consensus: 0.1%) following a 0.4% decline in June. That left the year-over-year rate at 3.4%, down from 3.5% in June. Core CPI, which excludes food and energy, was up 0.2% month-over-month (Briefing.com consensus: 0.2%) following an unchanged reading for June. On a year-over-year basis, core CPI was up 2.5% versus 2.6% in June. The July CPI report, at the least, did not stoke “new” concerns that the Fed will have to raise rates at the September FOMC meeting. That is the key takeaway from the report, and it was embedded in the realization that this report came in as expected. According to the CME fedWatch Tool, the probability of a 25-basis point hike at the September FOMC meeting is 36.1% versus 45.9% prior to the release of the CPI report. Ongoing tensions in the Middle East serve as the backdrop propping up inflation as the US and Iran remain deadlocked in negotiations to reopen the Strait of Hormuz. The US enforced its blockade of the strait by firing on a Panama-flagged ship attempting to cross the Gulf of Oman. The volume of mortgage applications in the US rose by 3.6% on the first week of August, the largest increase in two months, and rebounding from two straight periods of decline, according to data compiled by the Mortgage Bankers Association. The result was aligned with the slight respite for benchmark mortgage rates, tracking the momentary recovery for long-term Treasury bonds from their slide multi-decade highs. Applications to refinance a mortgage, which are more sensitive to short-term changes in interest rates, rose by 5%. In turn, applications for a mortgage to purchase a home rose by 3%.

MBS prices are up about 5/32 this morning while the DOW down about 100 points as the standoff between the US and Iran became more entrenched, raising doubts about progress on a deal to reopen the Strait of Hormuz. The persistently high oil prices and an unclear path to end the war built anticipation toward tomorrow’s Consumer Price Index (CPI) report. After Friday’s softer-than-expected jobs report, bets have shifted toward a Federal Reserve rate hike in September, with Cleveland Federal Reserve president Beth Hammack telling Yahoo Finance on Monday that it may take more than one rate hike to rein in inflation. Today’s economic reports showed that existing home sales decreased 1.7% month-over-month in July to a seasonally adjusted annual rate of 4.06 million (Briefing.com consensus: 4.07 million) from an upwardly revised 4.13 million (from 4.09 million) in June. Sales were up 0.7% on a year-over-year basis. The key takeaway from the report is that mortgage rates above 6.00%, limited inventory, and elevated prices continue to work against stronger existing home sales activity. The NFIB Small Business Optimism Index jumped to 99.8 in July 2026, the highest since August last year, compared to 97.4 in June and beating forecasts of 97.5. Of the 10 Optimism Index components, eight increased, and two decreased. Hiring plans hit their highest level since October 2022 and contributed most to the rise in the Index, with a net 20% of owners planning to create new jobs over the next three months, up 9 points from June. In July, the top reported issue was labor quality or availability. Also, both actual and planned price increases dropped notably from June. The net percent of owners raising average selling prices fell 7 points to a net 31% and a net 28% plan to increase prices, down 4 points from June. Real sales expectations and reports of inventory levels as “too low” both fell by 2 points. However, the Uncertainty Index rose 2 points, driven by an increase in owners reporting uncertainty about whether it is a good time to expand and capital expenditure plans.

MBS prices are down about 4/32 this morning while the DOW down about 60 points as we kick off a week of earnings and inflation data, with the major indexes within reach of all-time highs. Investors are in wait-and-see mode after Iran teased that an elusive deal to open the Strait of Hormuz is “very close.” Oil prices rose on Monday, with global benchmark Brent crude futures trading at $85 per barrel after plenty of will-they, won’t-they speculation surrounding the Hormuz reopening. Investors are also awaiting the latest Consumer Price Index (CPI) reading on Wednesday, which could change the narrative on inflation. Federal Reserve officials remain divided on whether to raise interest rates as they monitor the oil shock from the war in the Middle East and the subsequent impact on inflation. A surprisingly weak jobs report on Friday took some of the pressure off the Fed, though policymakers have said they are prepared to act if inflation comes in hotter than expected. There are no economic reports scheduled for release today.