Morning Report 7/9/12

Vital Statistics:

  Last Change Percent
S&P Futures  1347.7 -4.1 -0.30%
Eurostoxx Index 2232.2 -3.3 -0.15%
Oil (WTI) 84.93 0.5 0.57%
LIBOR 0.458 0.000 0.00%
US Dollar Index (DXY) 83.21 -0.169 -0.20%
10 Year Govt Bond Yield 1.52% -0.03%  
RPX Composite Real Estate Index 183.3 0.5  

Markets are down slightly as we kick off earnings season and Spanish yields top 7%. European finance ministers will meet in Brussels this morning, although no one expects much out of it. Bonds are up about half a point, while MBS are up a quarter. 

Earnings season starts tonight with Alcoa’s report. While the Street is somewhat pessimistic about Q2 numbers, I would point out that we coasted through the pre-announcement season with few misses.  The Street is estimating the S&P 500 will earn $25.23 this quarter, vs $24.06 last quarter and $25.16 a year ago. So for all intents and purposes the Street is looking at flat YOY earnings.

A couple positive data points with the markets:  we have couple big mergers this morning as well as some IPO filings. 

In an attempt to ease the credit crunch, the Federal Government is looking at how to address the problem of overlays – which is the layering of more stringent credit standards than the agencies require on Fannie, Freddie, and FHA loans. The government is keeping quiet about what potential remedies they are examining. Originators would love to see some sort of safe-harbor provision for lending which will lower or eliminate putback risk, which is the risk that the government will force an originator to buy back a loan after the fact if becomes non-performing. 

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