Markets Move on War Escalation and New Home Sales Confusion

Stocks, Bonds and most assets are lower on news that Israel attacked Iran’s South Pars natural gas field, which is being viewed as an escalation of the war. Iran responded by striking the world’s largest natural gas field in Qatar.

Brent Crude was up over $110/barrel, while WTI has not moved up as much, but the spread is the highest since the mid 2000’s and could result in higher WTI prices.

Bonds were much lower in the early going, but they seem to be having some indecision and have pared most of their losses. There was a bank regulation proposal that was announced today that would reduce bank reserve requirements, which could free up billions of dollars that banks could use to lend or purchase assets, like Treasuries.

Fed Meeting Breakdown

The Fed, as expected, left rates unchanged at their meeting yesterday. Their statement was very similar to the previous, adding a line about the uncertainty in the Middle East. There was only one dissenter, Stephen Miran.

Powell’s press conference was viewed as hawkish, as he did not pay much attention to the very weak February Jobs Report, showing 92,000 job losses. He said that the Fed does not pay attention to just one month, but looking back at all of 2025, there was almost no job gains. He appears to be whistling past the graveyard on jobs. He did mention that the unemployment rate was still low and stable, although it did rise to 4.4% in the last report.

Powell also made some comments on inflation, saying that they have not made as much progress as hoped. Their Summary of Economic Projections raised their forecast this year for Core PCE from 2.5% to 2.7%.

The dots plot chart did still show one 25bp rate cut priced in, which was unchanged. As a whole, the meeting was not friendly to the Bond market.

New Home Sales

New Home Sales, which measures signed contracts on new homes, fell almost 18% in January. This is still being delayed due to the shutdown, but was clearly a big miss. The media made a big deal about it, saying that we never see moves like this, but it’s worth noting that from October to November there was a positive 17% gain.

There are some factors that could have impacted the numbers, like bad weather in January, but rates were also lower then as well. But many of the new home builders, especially the bigger ones, are publicly traded. And it’s in their best interest for shareholders to make the fourth quarter look as strong as possible, so it’s possible they made a big push to close out the year and pulled forward demand.

Looking at the last three months, the average amount of sales was 688,000, and looking at the previous three months, it was 692,000…not much of a difference. We believe the miss today was more of a pull forward rather than weakness in January, but it remains to be seen. We have to see if this trend continues in the coming months.

Jobless Claims

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, fell 8,000 to 205,000. This figure remains low, but does not capture those entering the gig economy.

Continuing Claims, or those who continue to receive benefits after their initial claim, rose 10,000 to 1.86 million.

Technical Analysis

Mortgage Bonds were much lower earlier this morning, testing support at 98.58, but bouncing right back. The candle shows a lot of indecision with market participants. If the day were to close like this, it could be a reversal signal, but the 200-day Moving Average is now overhead and acting as resistance.

The 10-year got as high as 4.32%, but is now unchanged on the day back under the 4.30% resistance level. The 10-year candle right now is a shooting star pattern, which would portend lower yields ahead, but it's still a long day ahead.