Shutdown averted and national emergency declared

The president will sign the bill to fund the government, as was expected. According to the news this morning he will also invoke an emergency security measure to get funding to complete the wall. He will be speaking at 10:00 am ET this morning. Just a fight brewing with Democrats saying it is unconstitutional to attempt to fund his proposed border wall without approval from Congress. One hurdle overcome, but looks like the beginning of another battle between President Trump and Democrats as well as some Republicans. “No crisis justifies violating the Constitution,” Republican Senator Marco Rubio said on Twitter on Thursday.

On trade; negotiators say it was a good week in negotiations and will resume talks next week in Washington. Trump is leaning toward extending his increased tariffs that presently are set to engage March 1st for an additional 60 to 90 days if discussions continue to be productive. “Next week, both sides will meet again in Washington. I hope you will continue efforts to advance reaching a mutually beneficial, win-win agreement,” Xi said. “We feel that we have made headway on very, very important, and very difficult issues. We have additional work to do but we are hopeful,” US key negotiator Lighthizer said.

January import and export prices this morning are another data point that continues to support the no-inflation view. Import prices were thought to be flat, as reported prices declined 0.5%. Export prices were expected +0.1%, as reported -0.6%. Yr/yr import prices -1.7%, export prices -0.2%.

At 9:15 am January industrial production, expected to be up +0.1%, declined 0.6%; manufacturing dropped -0.9% against estimates of +0.1%. And January factory use at 78.2% is weaker than 78.8% forecasts.

At 9:30 am the DJIA opened up +215, the NASDAQ added +44, and the S&P was up +20. The 10-yr was at 2.68%, +2 bps from yesterday.

At 10:00 am the mid-month University of Michigan consumer sentiment index was expected at 93.0 from 91.2 on the final January index. As reported, the index increased to 95.5.

Treasuries and mortgage markets are holding well although fractionally weaker. The data this morning is adding some support. This week the 10-yr increased from 2.63% last Friday; MBS prices at this point are down 30 bps.