Morning Report – Very dovish comments out of Bullard 10/16/14

Markets are still heavy this morning as Europe sells off. Bonds continue to rally, with the 10 year yielding 2.07%.

Is Ebola driving the correction in the stock market? FWIW, I don’t think so – I think it is European markets, which are collapsing. The Eurostoxx 50 index is down 13.5% over the past month. Note that Bullard is saying the same thing right now, and also suggesting that the Fed consider delaying the end of QE. Which begs the question – why? Rates are falling all on their own – does the Fed really need to keep purchasing bonds to drive the 10 year below 2%? Regardless, these dovish comments should be market positive, though how it affects the 10 year is an open question.

Was yesterday’s pre-market print of 1.95% on the 10-year the capitulation point? Could be, but watch credit spreads and the PIIGS. If spreads continue to widen, all bets are off.

Initial Jobless Claims fell to the lowest since 2000, with 264k people filing for first time unemployment. Continuing Claims rose 1,000.

Industrial Production rebounded in September after a dismal August, increasing by 1%. Capacity Utilization rose to 79.3%. Philly Fed fell to 20.7 from 22.5.

The NAHB Housing Market Index fell from 59 to 54. While builder sentiment dipped in October, they are still positive on the housing market. Given we are now in the seasonally slow period for the builders, I don’t know how much to read into this. Of course the big drop in rates could change that.

The latest Fannie Mae Lender Sentiment Survey discusses compliance costs and how much it costs. Most lenders (72%) reported that recent regulations have had a “significant” effect on their business. Mid-sized lenders reported a 50% increase in compliance spending. Note that most lenders are worried more about compliance risk than volume decrease risk.

Not housing related, but Lockheed Martin thinks we could have nuclear fusion within a decade. This is almost limitless power, without the radioactive waste that we get from nuclear fission, which is how we power our reactors today. It would also make a huge dent in CO2 emissions if it could be done on a large scale. This is a game changer on so many levels – strategic and economic.

6 Responses

  1. I assume you guys have seen this already:

    “Houston, We Have a (Free Speech) Problem
    By Rod Dreher • October 15, 2014, 5:53 AM

    Houston’s embattled equal rights ordinance took another legal turn this week when it surfaced that city attorneys, in an unusual step, subpoenaed sermons given by local pastors who oppose the law and are tied to the conservative Christian activists that have sued the city.”

    http://www.theamericanconservative.com/dreher/houston-sermons-homosexuality-free-speech/

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  2. I have to say, this whole deal with the president suspending campaign activities in order to deal with the Ebola “crisis” is giving me bad flashbacks to Sen. McCain and the 2008 presidential campaign.

    Arghhhhhhhh!

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    • Mich:

      I have to say, this whole deal with the president suspending campaign activities in order to deal with the Ebola “crisis” is giving me bad flashbacks to Sen. McCain and the 2008 presidential campaign.

      Obama isn’t actually running for anything at this point, so not quite the same. And besides, I suspect a whole lot of Dems will breathe a sigh of relief upon hearing that he won’t be campaigning for them. He’s not exactly an asset to the party these days.

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  3. It’s still a stupid thing to say, though, wouldn’t you agree?

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    • Mich:

      It’s still a stupid thing to say, though, wouldn’t you agree?

      I’m probably not the best judge. I think this administration pretty routinely says stupid things.

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  4. Fair enough! 🙂

    Like

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