Morning Report: Markets rally on the Fed 9/22/16

Posted on September 22, 2016 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2163.0 7.0
Eurostoxx Index 347.6 5.0
Oil (WTI) 46.0 0.7
US dollar index 86.1 -0.2
10 Year Govt Bond Yield 1.65%
Current Coupon Fannie Mae TBA 103.3
Current Coupon Ginnie Mae TBA 104.2
30 Year Fixed Rate Mortgage 3.56

Markets are higher after the Fed maintained interest rates yesterday. Bonds and MBS are up.

The Fed kept interest rates unchanged yesterday, and released new economic projections. Most members expect the Fed to hike another 25 basis points this year according to the dot plot. They tweaked their economic projections slightly, taking down their GDP forecast for 2016 and inching up their unemployment forecast. Longer term projections were unchanged. Three members dissented, wanting to hike rates in September.

In her press conference, Janet Yellen was careful to say the Fed was confident in the economy: “Our decision does not reflect a lack of confidence in the economy, Conditions in the labor market have strengthened and we expect that to continue, and while inflation remains low we expect it to rise to our 2 percent objective over time.” She also guided that the default path was for one more rate hike this year, assuming no major changes in the economy: “I would expect to see (a rate increase this year) if we continue on the current course of labor market improvement, and there are no major risks that develop and we stay on the current course.”

Bonds rallied on the Fed’s announcement, and that is carrying over this morning as markets rally worldwide.

FWIW, Bill Gross isn’t buying that the Fed is “data dependent.” He thinks they are “market dependent.”

In other economic news this morning, initial Jobless Claims fell to 252k last week.

The Chicago Fed National Activity Index fell to -.55 last month, which confirms the slowdown we have seen in other indicators. The 3 month moving average is slightly negative, which means the economy is growing, albeit below trend.

Delinquencies and foreclosures continued to fall in August, according to Black Knight Financial Services. The rally in bonds from Brexit caused prepayments to spike, with prepayment speeds hitting a 3 year high. 4.24% of all homes are delinquent and just over 1% are in foreclosure.

Filed under: Economy, Federal Reserve, Morning Report |

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39 Responses

  1. Kevin S. Willis, on September 22, 2016 at 9:48 am said:

    Frist. Because I can.

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    • Kevin S. Willis, on September 22, 2016 at 12:10 pm said:

      Reagan won because of a few good one liners. Yeah, that’s why he beat Mondale. Sheesh.

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    • jnc4p, on September 22, 2016 at 2:13 pm said:

      Lincoln-Douglas was clearly the antithesis of what the founders had in mind by representative self government.

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      • ScottC, on September 22, 2016 at 2:35 pm said:

        jnc:

        Lincoln-Douglas was clearly the antithesis of what the founders had in mind by representative self government.

        If modern debates were even remotely like Lincoln-Douglas, they might actually have value as something other than pure entertainment.

        I think the debates should be real debates. The topic/questions should be known ahead of time rather than sprung on participants by moderators, each participant should give a prepared response to the question, and then be allowed to respond to the others’ prepared remarks. Moderators would exist only to inform the audience of the topic, to keep participants to time limits and to preserve decorum. Otherwise they would play no role whatsoever…no questions, no “fact checks”, no challenges.

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  3. jnc4p, on September 22, 2016 at 10:53 am said:

    Worth a read, even as a pure puff piece:

    http://www.vanityfair.com/news/2016/09/barack-obama-doris-kearns-goodwin-interview

    Obama still can’t think of anything he’s done wrong, or that he could have done differently. I do believe his refugee policies are driven by a sense of personal guilt over Syria.

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  4. jnc4p, on September 22, 2016 at 4:42 pm said:

    You’ll be pleased to know Scott that HRC just took herself out of the running for me.

    http://www.slate.com/blogs/moneybox/2016/09/22/hillary_clinton_wants_to_raise_the_estate_tax_even_higher_than_bernie_did.html

    Better to burn it than give it to the government.

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    • ScottC, on September 23, 2016 at 7:36 am said:

      jnc:

      You’ll be pleased to know Scott that HRC just took herself out of the running for me.

      So a soak-the-uber-rich tax is a bridge too far.

      BTW, just to be clear, I wasn’t trying to suggest that preferring Clinton to Trump is an unreasonable position, even though it is one I do not share. I just thought it was odd in light of your previous indifference to the distinctions between the major party candidates, and willingness to vote for an non-viable 3rd party candidate on principle rather than the least worst of the 2 major party candidates.

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    • Michigoose, on September 24, 2016 at 9:50 am said:

      I find it hard to believe that that’s your Rubicon. But to each his own. . .

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  5. Brent Nyitray, on September 22, 2016 at 9:47 pm said:

    Just got back from Open House at my son’s middle school. The sheer quantity of LGBT tolerance stuff was amazing. I swear there were more flyers, posters, etc than room number signs. The GSA was the only student organization that posted stuff looking for members. The other clubs (and sports teams) were given a posterboard and sign up sheet.

    I understand wanting to instill the no stigma and acceptance attitude in middle schoolers, but this looked like a “buy war bonds” campaign. I guess if it is worth doing, it is worth overdoing.

    Edit: Virtue signalling, Westchester County style..

    I guess that is par for the course these days as the local grocery store now cards everyone up to and including senior citizens to buy a six pack, because New York State Law requires them to do so. “Fuck! Another drunk driver and we have to do something. What’s left? Um, we can tell the stores to start carding senior citizens…..”

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  7. jnc4p, on September 23, 2016 at 1:09 pm said:

    Michi, any word from Sue’s family on if they received the flowers and how she is doing?

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    • Michigoose, on September 24, 2016 at 9:52 am said:

      She loved them–thank you (I should have let you know sooner–sorry).

      She’s OK; relatively pain-free, but mostly sleeping. From my limited experience, based on their description, she’s definitely slipping away.

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    • novahockey, on September 23, 2016 at 1:51 pm said:

      “The most accurate way to predict reaction to a debate is to watch it with the sound turned off.”

      talked about this in j-school. old story. ABC (i think?) ran a very critical story of Reagan’s education policy. but the B-roll was of Reagan with school kids. WH press office calls them up to thank them for their great story. confused, they say, we were pretty hard on you. WH: sure, but nobody heard you. too busy getting dinner on the table and quieting the kids. but they saw the pictures and those were great for us .

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  9. ScottC, on September 23, 2016 at 1:42 pm said:

    Impeccable logic.

    http://www.syracuse.com/su-news/index.ssf/2016/09/syracuse_university_student_go.html

    Syracuse University’s Student Association is looking to offer free tampons to students on campus.

    The student government hopes to follow in the footsteps of other colleges, like Brown University, which began stocking its bathrooms with feminine hygiene products this school year, said SA President Eric Evangelista…

    …Female students have asked Evangelista to consider the fact that menstrual products aren’t a choice and their cost — an average of $7 a box — is an inconvenience to a college student.

    Food isn’t a choice either, and it costs a lot more per month to eat than to menstruate. “Free” food for everyone?

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    • novahockey, on September 23, 2016 at 1:47 pm said:

      i’m going to claim ignorance here, but i know one thing for certain: if i bring home the wrong box of feminine hygiene product, i’ll know it. From that, I concluded that this is a very individualized purchase. So how is an institution going to provide that.

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      • ScottC, on September 23, 2016 at 2:05 pm said:

        nova:

        So how is an institution going to provide that.

        Like so much else in the progressive worldview, I’m guessing this has a lot more to do with the optics than with the practical effect. It’s the thought that counts.

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  10. jnc4p, on September 23, 2016 at 3:38 pm said:

    You assume that they have some sense of ethics or morals. Once you discard those, it’s easy.

    House of Cards is closer to the mark in terms of political ethics than most would care to admit.

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  11. jnc4p, on September 23, 2016 at 3:46 pm said:

    This is absurd:

    “A case in the 7th Circuit provides an even starker example. The Second Amendment states that “A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed.” But who are “the people” in this formulation? The Constitution guarantees several rights to “people” and “persons,” but the Supreme Court has never declared who, exactly, counts. Citizens? Lawful residents? Undocumented immigrants?

    There’s no sense in justifying or ignoring discrimination simply because the Second Amendment is involved.

    The 7th Circuit was forced to confront this quandary head on when considering a challenge to a federal law barring any “alien … unlawfully in the United States” from owning a “firearm or ammunition.” Mariano Meza-Rodriguez, who was unlawfully brought to America as a young child and never obtained citizenship, argued that this law violated his constitutional rights after he was charged with illegal gun possession. In response, the government insisted that undocumented immigrants are not among “the people” whose right to bear arms is protected by the Second Amendment. Three other federal appeals courts also reached that conclusion.

    But the 7th Circuit bucked this trend. The court found that the Constitution’s reference to “the people” in the Second Amendment encompassed both citizens and noncitizens, authorized or unauthorized. Undocumented immigrants, the majority wrote, who are part of America’s “national community” or have “developed sufficient connection with this country” are protected by the Second Amendment. The court then explained that no one’s right to bear arms is unlimited, and found that the government still had an “important governmental objective” in denying gun ownership to Meza-Rodriguez because he had already “disrespected the law.” (Before his gun bust, Meza-Rodriguez had had “multiple brushes” with law enforcement.)”

    http://www.slate.com/articles/news_and_politics/jurisprudence/2016/09/the_liberal_second_amendment.html

    No, illegal aliens do not have a constitutional right to own a gun. If they are going to argue that, then presumably they have a constitutional right to vote as well.

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    • novahockey, on September 23, 2016 at 3:50 pm said:

      F it.

      turn your key sir!

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    • Michigoose, on September 24, 2016 at 9:57 am said:

      I’m not sure or not if it will surprise you that I agree with you. No, undocumented people (whether DREAMER or not) do not have constitutional rights. That’s just one of the reasons why I wish we had a functional Congress–there are some very important decisions that need to be made.

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      • ScottC, on September 24, 2016 at 1:53 pm said:

        Mich:

        That’s just one of the reasons why I wish we had a functional Congress–…

        It’s not Congress’s job to either enforce the laws or interpret them. To the extent that illegals are being treated as if they have rights they don’t actually have by law enforcement, or granted fictional rights by the courts, that’s on the executive branch ( i.e. Obama) or the courts.

        BTW, I wonder what it is exactly about congress that you find not functional. The primary thing that I find dysfunctional about congress is the way it facilitates the executive abuse of power by writing vague laws that allows the unconstitutional regulatory bureaucracy to fill in the blanks and essentially write its own laws.

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  12. Let the mutherfuker burn!, on September 23, 2016 at 3:57 pm said:

    That’s why they’re politicians.

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  13. jnc4p, on September 23, 2016 at 3:58 pm said:

    I’m thinking he’s going to beat Jimmy Carter easily as the most sanctimonious ex-president.

    “Obama: once out of office, I’m gonna stop being polite and start getting real
    Updated by Andrew Prokop
    Sep 23, 2016, 12:00p”

    http://www.vox.com/policy-and-politics/2016/9/23/13029670/obama-after-presidency

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    • Michigoose, on September 24, 2016 at 9:58 am said:

      Good.

      Jimmy Carter is probably the best ex-president we’ve ever had.

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      • ScottC, on September 24, 2016 at 1:58 pm said:

        Mich:

        Jimmy Carter is probably the best ex-president we’ve ever had.

        Why? What makes an ex-president a good ex-president?

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      • jnc4p, on September 26, 2016 at 9:27 am said:

        He’s done a good job with humanitarian work like Habitat for Humanity and I’d even give him a pass on the Carter Center’s work on election transparency.

        However, he’s actively interfered with the current foreign policy of the United States on multiple occasions, causing problems for both his Republican and Democratic successors.

        In addition, by maintaining an active political persona instead of gracefully bowing out, he helps to amplify the current partisan atmosphere.

        I don’t think you’ll see ex-presidents gracefully bowing out the way that George H.W. Bush & George W. Bush have done going forward.

        Expect to see more of a Carter mold. For what that looks like from a Republican, see Dick Cheney’s commentary since leaving office.

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  14. ScottC, on September 23, 2016 at 7:06 pm said:

    New post up.

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  15. ScottC, on September 23, 2016 at 7:08 pm said:

    jnc:

    I’m thinking he’s going to beat Jimmy Carter easily as the most sanctimonious ex-president.

    And I thought he was an insufferable narcissist as president….You ain’t seen nothing yet.

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  16. Michigoose, on September 24, 2016 at 2:47 pm said:

    Good lord, Brent. What did they feed your Badgers this week?!?? That game was awful (from my point of view). Congrats!

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    • Brent Nyitray, on September 24, 2016 at 5:09 pm said:

      Thanks… Was tied up with boy scout stuff all day, so i didn’t get a chance to do more than review the box score…

      I still can’t believe we were unranked going into the season..

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    • novahockey, on September 26, 2016 at 8:56 am said:

      wooo. lost to Duke. at football. at least the D-coordinator got fired. i think such a loss is a head coaching firing offense.

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      • ScottC, on September 26, 2016 at 9:05 am said:

        nova:

        Your football team may need some work, but your president had a commendable op-ed today in the WSJ.

        http://www.wsj.com/articles/the-ncaa-isnt-a-moral-arbiternor-should-it-be-1474841413

        Our society has become inured to public disputes over neuralgic moral and social questions. These debates will continue as the legal and political process takes its course. In May, the Justice Department’s Civil Rights Division filed suit against the state of North Carolina, arguing that H.B. 2 is “in violation of Title VII of the Civil Rights Act of 1964, Title IX of the Education Amendments of 1972 and the Violence Against Women Reauthorization Act of 2013.” The federal government argues that discrimination based on “sex,” which is illegal, includes “gender identity.”

        North Carolina filed a counter suit, accusing the federal government of “baseless and blatant overreach.” The Fourth Circuit Court of Appeals in Richmond, Va., deferred to the Justice Department’s position in an April decision subsequently stayed by the Supreme Court.

        In the interim, it is not the role of the NCAA to employ the economic power it derives from member universities to attempt to influence the outcome of the legal process or change legislation. When it comes to complex, contentious social issues, universities have a critical role to play in fostering reflection, discussion and informed debate. No matter how popular or profitable certain college sports become, athletic associations should not usurp that role. I was particularly disheartened that the NCAA took action without consulting its member universities.

        The role of such associations is to foster athletic competition that is fair and serves the well-being of student-athletes. There is plenty of work for them to do in that sphere without assuming the role of spokesperson for their members on contentious political and social issues.

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