Stocks are higher this morning on no real news. Bonds and MBS are down small.
The ISM New York Survey increased from 63.1 to 68.8 last month.
Factory orders rose 1.8% in June. May was revised downward to -1.1%.
The IBD / TIPP Economic Optimism Index fell to 46.9 from 48.1.
Puerto Rico officially defaulted on its debt yesterday. The Obama Administration has said that there will be no Federal bailout of the U.S. commonwealth. Want to know where the bodies are buried? Here is a list of the muni funds that hold PR debt. Recovery rates could be as low as 35 cents on the dollar, according to Moody’s.
July auto sales were brisk, as SUVs and luxury vehicles sold well. Pretty much everyone reported an increase of sales from 2.4% to 10.5%.
The second quarter was rough for the mortgage REITs. American Capital Agency reported a 6% drop in book value last week (a staggering number), and MFA Financial missed as well. Mortgage REITs are big investors in mortgage backed securities, which are sold by your friendly secondary folks. They have been de-leveraging ahead of the Fed’s normalization process, which means that they have less appetite for new paper. This means that mortgage rates will be slightly higher, at the margin. Interestingly, the mortgage REIT sector seems to have found an angle for cheap financing by joining their local Federal Home Loan Bank. You can see how the sector has gotten smacked around by looking at the chart of the iShares Mortgage Real Estate ETF.
Home prices continue to rise on tight inventory, according to CoreLogic. Home prices rose 6.5% in June and are now 7.4% below their April 2006 peak. Tight inventory remains an issue – nationwide, the average supply of homes for sale was 4.8 months. 6.5 months is considered a balanced market. In highly desirable areas, like San Jose and Denver, the supply was 1.6 months. Colorado led the country with almost 10% home price appreciation, while the People’s Republic of Taxachussetts brought up the rear by falling 5%. The Northeast still has a clogged foreclosure pipeline to deal with.
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