Morning Report: Confidence in the economy improved 11/16/16

Vital Statistics:

Last Change
S&P Futures 2171.8 -8.0
Eurostoxx Index 337.7 -2.0
Oil (WTI) 45.4 -0.4
US dollar index 90.6 0.2
10 Year Govt Bond Yield 2.27%
Current Coupon Fannie Mae TBA 103
Current Coupon Ginnie Mae TBA 104
30 Year Fixed Rate Mortgage 4

Stocks are weaker this morning as commodities rally. Bonds and MBS are down.

Mortgage Applications fell 9% last week as purchases fell 6% and refis fell 11%. I’m actually surprised it wasn’t worse, as the 10 year bond yield went from 1.78% to 2.14%.

Inflation at the wholesale level remains low as the producer price index was flat for October. Ex-food and energy, they were down .2%. Ex food, energy and services the index was down .1% and is up 1.6% for the year. Certainly nothing to concern the Fed, however the Fed Funds futures are factoring in a 94% chance of a rate hike next month. At the beginning of the month, the odds were 68%.

Donald Trump’s transition team is already having power struggles, as Chris Christie loyalists were sent packing after VP Mike Pence replaced him as head of the transition team. Given that Trump was an outsider, his transition is going to be a lot more rocky than we are used to.

It looks like Trump is considering famed value investor Wilbur Ross and ex-Goldman guy Steve Mnuchin to Treasury and Commerce. Apparently an announcement is imminent.

Industrial Production was flat in October, while manufacturing production was up 0.2%. Capacity Utilization slipped to 75.3%. The strong dollar is going to be a headwind for the manufacturing sector, although its weight in the US economy is a lot smaller than it used to be.

Confidence in the economy surged after the election according to Gallup. The improvement was largely partisan as Republicans became more bullish on the economy.

Fast money poured into ETF last week on the election news. Large caps were bought while small caps were sold. Pharma and biotech saw big inflows, as well as tech, which would benefit the most from an overseas repatriation tax holiday.

Home prices rose 6.6% last month according to the FNC indices.

%d bloggers like this: