Vital Statistics:
Last | Change | |
S&P Futures | 2262.5 | -2.0 |
Eurostoxx Index | 365.1 | -0.2 |
Oil (WTI) | 5375.0 | 0.5 |
US dollar index | 92.6 | -0.4 |
10 Year Govt Bond Yield | 2.42% | |
Current Coupon Fannie Mae TBA | 103 | |
Current Coupon Ginnie Mae TBA | 104 | |
30 Year Fixed Rate Mortgage | 4.18 |
Stocks are down small on no real news. Bonds are up on the FOMC minutes from yesterday.
The private sector added 153,000 jobs in December, according to the ADP jobs report. This is below the 172,000 consensus figure. The Street is looking for 175,000 jobs in tomorrow’s payroll report. As the labor market tightens, job growth should slow.
Announced job cuts increased slightly in December, according to outplacement firm Challenger, Gray and Christmas.
Initial Jobless Claims came in at 235k last week, which is the lowest level since 1973. People that have jobs are generally keeping them.
Consumer comfort slipped last week, according to the Bloomberg Consumer Comfort Index.
The ISM Non-Manufacturing Index was flat in December, and came in above estimates. New Orders and pricing drove the increase, however employment fell.
The FOMC minutes didn’t reveal much from the December meeting, aside from the fact that the interest rate forecast was based on the assumption that we would see more fiscal stimulus out of Washington, either via an infrastructure build or a tax cut. If we don’t get that, then the growth estimates, (and the assumed path of interest rate hikes) are probably too high. Note that Congress seems to be settling on repealing Obamacare as the first order of business. If so, that would probably poison the well for any sort of infrastructure spend and / or tax cuts. Which means interest rates should be heading downward, all things being equal. Bonds initially rallied on the minutes, gave back the gains, and then started rallying again this morning. Note that the Fed Funds futures are predicting two rate hikes next year, with a possibility of a third.
Note that the Fed has been consistently high in its estimates for GDP growth. The chart below looks at the Fed’s forecast for 2016 GDP growth at different points in time, starting with the June 2014 estimate.
Part of the problem with the Fed’s forecast has been that this recovery is different from the typical cyclical slowdown. In those, the issue is excess inventory, which causes companies to lay off employees. Once the excess inventory is liquidated and sufficient pent-up demand is created, the expansion begins. This time however the issue is bad debt from the bubble years, and that takes longer to work off. Instead of a V-shaped recession and recovery, we have more of a bathtub-shaped recovery. The effect of the bubble years also has a scarring effect on both consumers and business leaders (what Keynes called the animal spirits) which causes caution. That is why capital expenditures have been weak and why we are only building about 1.3 million new houses a year when we probably need 2 million a year.
Holiday sales (at least for the bricks and mortar retailers) seem to be disappointing as same store sales come in. Kohl’s and Macy’s both warned this morning and are down double digit percentages. Macy’s is cutting 10,000 jobs. Given that online is cannibalizing bricks and mortar, it is tough to draw too many conclusions from this, however it is probably helping bonds at the margin. We will get the government’s estimate of retail sales next Friday.
Mortgage Performance improved in the third quarter, according to the OCC. 94.8% of first lien mortgages were current and performing as of 9/30 compared to 93.9% last year. Foreclosure starts were down 25%.
Filed under: Economy, Morning Report |
LikeLiked by 1 person
Any chance the Southern Poverty Law Center calls this a hate crime? I am thinking about 0%.
Though whitesplaining is.
LikeLiked by 1 person
check your privilege.
[as an aside .. where exactly? with the bell hop?]
LikeLiked by 1 person
I’ll take it!
LikeLiked by 1 person
“Ahem. I wish to ‘check my privilege’, please. And I expect it to be returned in good shape!”
LikeLike
Just order your safety pin box subscription.
LikeLike
“Any chance the Southern Poverty Law Center calls this a hate crime?”
If they do it will be positions as a reaction to Trump, thus ultimately Trump’s fault.
LikeLike
Textbook example of “it’s bad policy if Republicans do it”.
http://www.slate.com/blogs/moneybox/2017/01/04/republicans_are_secretly_killing_the_mortgage_interest_deduction.html
LikeLike
“And what if you still itemize? Owning your home will net you less in tax savings than before, which should make it a less valuable asset. After all, the bigger the standard deduction, the smaller the edge from itemizing.”
This sounds like a real struggle to make a net positive into a negative. Basically, the standard education doubling seems like almost everybody will pay less in taxes. The argument seems primarily to be that all that interest you pay on your mortgage won’t be giving you an edge on people who pay less interest, anymore, so . . . I dunno, maybe you won’t be as quick to buy a new house because you won’t see a tax advantage in the mortgage interest?
I’m really having a hard time seeing how this is a likely negative. And how seriously would such a thing impact housing prices? Really?
I’m not following.
LikeLike
like trolling people on twitter, the right id co-opting the left’s game. and they don’t like it.
LikeLiked by 1 person
http://www.theatlantic.com/business/archive/2012/07/why-the-mortgage-interest-deduction-is-terrible/259915/
http://www.vox.com/policy-and-politics/2015/12/11/9901144/mortgage-interest-deduction
LikeLike
Hah. I bet there’s one almost identical to those on Slate somewhere. 😉
LikeLike
I’m old enough to remember when democrats thought the mortgage interest deduction was just a sop to the rich (since the poor rent) and therefore it should go
LikeLiked by 1 person
“Republicans want to eliminate most other major deductions, including the break for state and local taxes”
there’s the money shot and how you stick it to NY, MA, CA, etc.
LikeLiked by 1 person
I can live with that.
LikeLike
In honor of Tucker’s FOX News promotion.
https://newrepublic.com/article/61255/representative-ron-paul-2008-republican-primary-president
Pancakes with hookers in Reno and now this. Some dudes get all the breaks.
LikeLike
Worth a read:
“What ISIS Really Is
Graeme Wood’s new book, “The Way of the Strangers,” asks whether the murderous group is truly Islamic.
By Omer Aziz
January 5, 2017″
https://newrepublic.com/article/139650/isis-really
LikeLike
jnc:
Graeme Wood’s new book, “The Way of the Strangers,”
Is this the guy who’s article about ISIS you linked to here some time ago? That was the best article about the origins of ISIS that I have read.
LikeLike
LikeLiked by 1 person
You can’t make this up. Vox blames anti-Trump attack on Trump for “creating a climate of hate”.
http://www.vox.com/identities/2017/1/5/14176650/chicago-torture-video-trump
LikeLike
they really don’t think people have any agency at all, do they?
LikeLike
Trump apparently must.
LikeLike
Why you make me hit you baby?
Same kinda right-wing shit that caused an avowed communist to kill Kennedy.
LikeLiked by 1 person
Jacobin gets it:
“Safety Pins and Swastikas
The frameworks of liberal identity politics and “alt-right” white nationalism are proving curiously compatible.
by Shuja Haider”
https://www.jacobinmag.com/2017/01/safety-pin-box-richard-spencer-neo-nazis-alt-right-identity-politics/
LikeLiked by 1 person
Just curious, does this Chicago kidnapping mean we finally have a post-Trump election hate crime that hasn’t turned out to be a hoax?
LikeLike
Well, this one has actual charges being filed so that’s the first sign that it’s probably real.
LikeLiked by 1 person
https://twitter.com/seanmdav/status/817062862741012480
LikeLike