Markets are higher this morning on no real news. Bonds and MBS are flat
Mortgage applications rose 9% last week as purchases rose 11.7% and refis rose 7.4%. Interest rates were flat for most of the week until the jobs report on Friday, so these are good numbers, all things considered. The 10 year continues to bump to see resistance at the 1.7% level.
Job opening increased to 5.8 million in April, according to the JOLTS report, which matches a record set last July. Hires and quits fell however, which is another reason for the Fed to stand pat at the FOMC meeting next week.
Separately, a survey of CFOs indicates that companies are holding off hiring due to uncertainties regarding regulation and the general machinations in DC. Interestingly, hiring and retaining skilled labor came in as the #2 concern from #5 last year. That corroborates what the JOLTS report is saying: there are a lot of openings for skilled labor, but hirings are down because skilled labor is tough to find. On the other side of the coin, unskilled labor is becoming more expensive due to the recent spate of minimum wage hikes, which is creating an even bigger glut as companies substitute technology for labor.
Meanwhile in banking, machine learning continues to displace more and more workers. What can be automated ultimately will be.
Hillary Clinton won California and has enough delegates to sew up the nomination. Donald Trump continues on his mission to alienate as many people as possible. The big question is Bernie Sanders. Given the backdrop of the FBI investigation, he may decide to stick around until that is settled. That said, Obama has signalled that Hillary did nothing wrong, and I am sure his DOJ and his FBI has taken note. The Democratic establishment is going to put more and more pressure on Bernie to throw his support behind Hillary and unite to defeat Trump.
Was the big miss in payrolls just a spurious data point or is it the start of a downturn in the labor market? Citi says to watch the initial jobless claims number tomorrow. Typically you should see a spike in initial jobless claims following such a weak number.
Republicans are drafting a bill to fix some of the issues with Dodd-Frank, particularly Volcker rule and some of the issues with the CFPB. Banks that meet capital requirements will be allowed to prop trade, and the CFPB will come under Congressional oversight and have a Board instead of a single director. There are two issues this is intended to fix. First, market making almost doesn’t exist any more as banks are afraid to venture too close to proprietary trading and the Volcker rule. The next crash (and there will be one) investors will be in for a rude awakening when they cannot sell their less liquid stocks because there is no bid. It will be even worse for bonds, and could be a major issue for ETFs. The second issue is the CFPB, which is regulating by enforcement action. Consumer advocates are getting sick and tired of tight credit, which is creating some consternation with other members of the left who still think the banks are unregulated and need to be reined in. Elizabeth Warren is leading the charge against this, which makes sense since the CFPB is her baby.