Morning Report: Fed hikes but markets sanguine 3/16/17

Vital Statistics:

Last Change
S&P Futures 2384.5 4.0
Eurostoxx Index 377.3 2.2
Oil (WTI) 49.2 0.3
US dollar index 90.7  
10 Year Govt Bond Yield 2.53%
Current Coupon Fannie Mae TBA 101.53
Current Coupon Ginnie Mae TBA 102.87
30 Year Fixed Rate Mortgage 4.29

Stocks are higher this morning after the Fed hiked rates. Bonds and MBS are up.

As expected, the Fed hiked rates yesterday. The statement was taken as relatively dovish, and the dot plot showed a slight increase in the 2017 Fed funds rate projection, however it was only about 4 basis points from December. In the press briefing, Yellen’s main message was that the economy is doing well. The dovish language and the modest increase in the dot plot caused bonds to rally, which pushed the 10 year below 2.5% yesterday.  We saw a similar reaction in the 2 year, which went from a 1.4% yield to a 1.3% yield. The economic projections were pretty much unchanged from December. You can see a comparison of the dot plots below, where the central tendency (or average of the 2017 dots) increased from 1.49% in December to 1.53% in March:

dot plot comparison dec vs mar

Housing starts came in at 1.29 million in February, slightly better than expected. This is 3% above January, and 6% higher than last year. Single family starts increased to 872k, which was 3% above last year. Building Permits came in at 1.21 million which is up 3% YOY, but below January’s numbers. Housing starts are still surprisingly depressed given the dearth of inventory.

Job openings increased to 5.6 million in January, according to the JOLTS data. The quits rate (which usually leads wage growth) inched up to 2.2%. The quits rate is a big number to the Fed and one they watch closely.

In other economic data, initial jobless claims fell to 241k, while the Philly Fed fell from 35 year highs. Consumer comfort edged up as well.

Donald Trumps’s proposed budget increases defense, while cutting discretionary spending pretty much everywhere else. Entitlements stay untouched. HUD will see a decrease, although it appears (at least as of now) that Ginnie Mae and the mortgage area will not feel it. It is too early to tell if it has much support. If he can’t get a budget deal, then we continue to fund the government on continuing resolutions, which more or less means the first Obama budget.

27 Responses

  1. Looks like an interesting read:

    “‘African Kaiser’: A sweeping military history that reads like a novel
    By Michael Dirda
    March 15 at 12:05 PM”


  2. The FTC dedicates a page to economic liberty and reducing burdensome regulations


  3. I think this is already the case vis-a-vis the courts being the prize in politics:

    “Watson’s imaginative reasoning in Hawaii v. Trump asserts a new judicial power to disregard formal law if the president’s personal words create a basis for mistrusting his motives. In the age of Trump, many will be sympathetic to this judicial power—but it is crammed with dangers, too. Not the least of those dangers is that this new rule creates incentives for the president to race to cram the courts with his people in the possibly brief window in which his party controls the Senate. If presidential power ebbs and flows according to the opinions the judges of the moment happen to feel about the character of the president of the moment, the day has come when the courts too must become a prize of hyper-partisan politics.”


    • The left has always played this game. I guess the right has to now as well.


      • My guess is that unlike the stay of the former order, these TROs will be dissolved.

        For a TRO, the quality of evidence is different and much lower [than it is for a trial]. The former immigration order had a significant due process deficiency that this one does not. So it was not likely that the former immigration order would have been permitted to operate by most courts. I predict this Stay will be dissolved, sooner rather than later.


        • I am beginning to think DJT is marginalizing himself with the Senate, particularly.

          Best thing that could happen long term from this presidency would be the weakening of the executive branch and the strengthening of the legislative branch. The weakening of the executive won’t be what DJT wants but his limited grasp of much of what swirls around him will lead to this, inevitably.

          Won’t last past the next strong POTUS, but Tweeter in Chief will not be taken seriously making up stuff, and the presidency will be weakened, vis-vis the Legislature.


        • mark:

          Your faith that legal analysis as opposed to political preference will dictate any appeal court’s decision is admirable, although I am not sure that recent experience justifies it.


        • mark:

          I actually just got around to reading Judge Watson’s ruling on the travel ban order.

          Have you read it? I’m wondering what you think of the idea that hurt feelings represent a legitimate “harm” which gives a person standing to sue the government.

          I’m also curious about what you think of the idea that the exact same law or regulation can be either constitutional or not constitutional, depending upon the motivations of the person/people that enacted it. And also that motivations can be and should be divined by the court via election campaign rhetoric.


        • I’m also curious about what you think of the idea that the exact same law or regulation can be either constitutional or not constitutional, depending upon the motivations of the person/people that enacted it. And also that motivations can be and should be divined by the court via election campaign rhetoric.

          I don’t believe this TRO can stand the light of serious scrutiny. The campaign rhetoric is what I was referring to when I mentioned the lower standard for TRO evidence. No, I don’t think that will cut it at an evidentiary hearing.

          The only way, IMHO, that a plaintiff could get from here to there is with a smoking gun produced in discovery in which DJT or the AG or whoever was responsible for the regulation actually said this was the first step toward the “Muslim ban”. In that case, it would be analogous to, say, the legislative history that got the NC voter restrictions thrown out.

          But that will not happen, and America is open to 98% of the Muslims in the world, and the POTUS has the right to temporarily restrict immigration. So this will poof away, I think.

          Much has been made of the HI Fed Ct. having noticed it is a dumb rule but it is NOT FOR A COURT to rule on dumbness, dammit.

          The only winning attack on the executive order in a courtroom would have to come after the rule was extended “indefinitely” thus violating the statute against discriminating against whole nations. I even think the Admin could extend it several times for 90 days before someone could make a case that continuing extensions were an attempt to do by indirection what Congress prohibited by direction. But also, Congress could simply indefinitely suspend immigration from those countries.


    • jnc:

      In the age of Trump, many will be sympathetic to this judicial power

      Only unprincipled people who care not a whit for the rule of law will be sympathetic to it.


  4. Because Trump should have respected the illegal leaking of his tax returns.

    “David Cay Johnston, the Pulitzer Prize-winning journalist who came up with two pages from Donald Trump’s 2005 tax return, ripped the White House for its handling of his Tuesday scoop. “This is, to anybody in the news business, totally unethical,” said Johnston in a chat with Joe Madison on SiriusXM News & Issues. “They took my exclusive story before it went up at DC Report, which is my website, DC Report. They went and gave it to other reporters, that’s just you don’t do that. I’ve never had a company or a White House all the way back to Nixon do anything within a million miles of that and then they acknowledged the document but they had this nasty statement that they put out. And they never officially got back to me they put out a statement, which tells you this really got under Donald Trump’s skin.””

    Guess Trump doesn’t respect scoops all that much. This is a classic example of the media making the story about themselves which won’t generate much sympathy for them with the public.

    Scott Adams on it:

    “How to Leak Like a Master Persuader
    Posted March 16th, 2017”


    • Many years ago I had several e-mail exchanges with David Cay Johnston about his coverage of tax issues when he was a NYT reporter. He’s a typically partisan leftist reporter.


        • Unfortunately I’ve changed email accounts since then, and so have lost the threads. But I recall one of them involved a bunch of statistical deceptions in order to downplay the amount of taxes that were paid by the highest income earners. Typical NYT propaganda. I think I corresponded with him over at least two, and maybe three of his NYT stories.

          This was back in the late 1990s when I was living in Hong Kong. I used to read this hybrid demon of a newspapaer called the International Herald Tribune, a joint effort between the NYT and the WaPo. It was there that I would read DCJ’s tax articles. Back then the NYT published a list of reporters with e-mail addresses on the internet, which I don’t think they do any more, and I was irritated enough by his stories to bother to look him up and challenge him. To his credit, he actually responded, which not many reporters would do. But he was still, very clearly, a partisan reporter with a political agenda.


    • Jesus! That is quite the butthurt.


    • Also the year: 2005. Right before the bubble bursts. He probably has a crapton of NOLs from 2008-2011 that he has been able to apply to current income. Probably does pay a pretty low rate, assuming he has semi-competent accountants.

      Show a return from 2008 – 2011 you can beat him up for losing money. Show a return from afterward, you can beat him up for having a low tax liability. Pre-bubble, you can’t beat him up for anything except making money.


  5. I laughed.

    A local talk show host kept referring to, er, “her” as “Rick”.


  6. Like

  7. McWing:

    Were you University of Arizona or Arizona State?

    As if it isn’t embarrassing enough that such an office even exists, the Office for Diversity and Inclusive Excellence at UoA has issued guidelines to faculty, which include the following:

    Creating a safe space for students for engaging in dialogue about challenging topics is vital in promoting positive intergroup interactions. Some ground rules might include:…If a student feels hurt or offended by another student’s comment, the hurt student can say “ouch.” In acknowledgement, the student who made the hurtful comment says “oops.” If necessary, there can be further dialogue about this exchange.

    Click to access Classroom%20Dialogue%20Guide%20.pdf

    (h/t The Federalist:


    • I went to U of A.

      How embarrassing.


    • i think it was Colbert. maybe not.
      had a bunch of college kids in the room talking about the importance of diversity, etc.

      Enter scene right: a caricature of a stereotypical, flamboyant gay man. like nathan lane but to an extreme. says a few things, leaves

      colbert: describe that man.

      kids: friendly, cheerful. happy. outgoing.

      not one physical description. you could tell that it made them physically uncomfortable.


  8. The conservative Never Trumpers I follow on Twitter relish in how Trump embarrasses him.


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