Morning Report – Pre-holiday data dump 12/23/14

Markets are higher as decent data comes in. Bonds and MBS are down small. Almost all of this week’s data is being released today. Today is a full day, Wed will be a half day, and Friday will be a full day (so far).

Third quarter GDP was revised upward to to +5% from +3.9%. Personal Consumption was revised upward from 2.2% to 3.2%. Inflation remained unchanged at +1.4%.

Durable Goods orders on the other hand came in weaker than expected, down .7%, after the Street was expecting +3%.

New Home Sales fell to 438k from 458k last month. This is the seasonal slow period, so I wouldn’t read too much into it.

Personal Income rose .4% in November, while Personal Spending rose .5%. The PCE deflator (the preferred inflation measure for the Fed) was down .2% on a month-over-month basis and up 1.2% on a year-over year basis.

The University of Michigan Consumer Sentiment Index ticked down to 93.6 in December. The Richmond Fed Manufacturing Index rose to 7 from 4.

The FHFA Home Price Index rose .6% in October after a flat September. On a year over year basis, home prices increased 4.5%. The index is roughly 5% lower than its April 2007 peak. Remember, this index only looks at homes with a conforming mortgage, so it is a narrower sample than Case-Shiller.

Ocwen stock got slammed yesterday as they announced a settlement with New York State and its founder stepped down. Ocwen will not be able to purchase any more MSRs without New York State approval. They also were fined $150 million. The stock got rocked for 27% yesterday, and is down 70% for the year.The stock is down another 3 bucks (19%) this morning.. This one may be a value trap, folks.

Rick Santelli from CNBC spells out the yield curve flattening scenarios. The yield curve has been flattening (the spread between long term rates and short term rates has been narrowing), and many traders continue to have “flattening” trades on. Essentially, this is what i was talking about yesterday with the Fed – the Fed could raise short term rates yet the 10 year (and mortgage rates) might not move all that much because of global demand for long-term sovereign debt. He also points out the big caveat to this: that ECB President Mario Draghi pursues a less aggressive policy than the market is already pricing in. This would put pressure on Euro sovereigns with microscopic yields (like the German Bund at 59 basis points), and could cause world sovereign bond markets to sell off in a co-ordinated fashion. Remember the economic backdrop in the US: A 5% GDP growth rate and a 2.2% 10 year bond yield are strange bedfellows. Note that a sell off in bonds might not guarantee a rally in the stock market either…

Finally, the MR will be on hiatus for the holidays. Wishing you and yours all the best.

3 Responses

  1. Like

  2. The confidence fairy came back all on her own, without any big massive spending program.

    Japan, on the other hand continues to take the Krugman Rx.

    Seriously, the only reason he gets the pass he does is because he is a liberal..


  3. New post up.


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