Geopolitics Trump the Data

[Andrew Postell]

Markets remain dominated by geopolitics, with the Iran conflict overwhelming the economic data. Weekly jobless claims and import/export price indexes were mixed, but those releases barely registered as energy markets continued to reprice risk. The oil shock is still the main driver, keeping inflation concerns front and center. Crude oil futures topped $79 for the first time in a year.

That pressure translated into a sharp selloff in stocks and higher Treasury yields, as markets pushed rate‑cut expectations further out. Notably, bonds have not acted as a safe haven. Mortgages, however, are holding up relatively well given the backdrop, with current‑coupon MBS down just 4–5 ticks on the day. ARM pricing should be slightly weaker compared to fixed-rate counterparts, with the yield curve flattening as the case for fewer Fed cuts this year continues to build.

Looking ahead, tomorrow brings January retail sales and the employment report. Under normal circumstances those would be market‑moving, but for now they remain secondary to oil prices and geopolitical headlines.

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