Morning Report: FOMC minutes 4/6/17

Vital Statistics:

Last Change
S&P Futures 2348.0 1.5
Eurostoxx Index 379.8 -0.3
Oil (WTI) 51.4 0.2
US dollar index 90.5  
10 Year Govt Bond Yield 2.35%
Current Coupon Fannie Mae TBA 102.53
Current Coupon Ginnie Mae TBA 103.813
30 Year Fixed Rate Mortgage 4.07

Stocks are lower this morning after the FOMC worried about stock prices. Bonds and MBS are down small.

Job cuts rose 17% in March, according to outplacement firm Challenger, Gray and Christmas. Telecom and retail were the two main sectors to trim staff. Note that this report only measures announced job cuts (in press releases), not actual job cuts. We are still seeing losses in the energy patch, however it is much slower than the past two years when we lost over 200k jobs.

On the other side of the coin, hiring announcements continue to hit records, with the Home Despot announcing 80,000 seasonal hires in March.

Initial Jobless Claims fell to 234k last week, while the Gallup Good Jobs index improved. The drop in initial jobless claims was the most in 2 years.

The FOMC minutes showed the Fed is beginning to discount the possibility of a big Trump fiscal expansion. The failure of health care reform means that the available resources for a big infrastructure spend or tax cuts is much less. The Fed also discussed what to do with their $4.5 trillion balance sheet, and how to go about shrinking it. The terms “gradual” and “phase out” were used, which means they probably aren’t going to stop reinvesting maturing principal all at once and will perhaps take a couple of meetings to see how it goes. The Fed’s fear is that the additional contractionary effects of reducing the balance sheet along with rate hikes will be too much and push the economy into a recession.

The staff also noted that stock values are above historical norms, which is undoubtedly another reason for them to go slowly. The worst-kept secret in financial markets is that the Fed targets asset prices and uses them to guide policy.

Goldman Chief Economist Jan Hatzius says that reducing the Fed’s balance sheet is probably a good step to clear the decks for whoever will be the new Fed President ahead of the end of Janet Yellen’s term in early 2018.

The left has set up a new website to keep track of HUD and what they are doing. They want to ensure that affordable housing targets don’t fall by the wayside as HUD works on housing reform. Given the tight housing inventory these days, affordable housing is a huge need.

Donald Trump economic adviser Gary Cohn supports some sort of return to the Glass-Steagall days, where consumer banking is separated from the underwriting and trading functions of investment banks. Some Senators and policy types were surprised to hear a Wall Street type advising that. The conversation regarding deposits will be further complicated by the emerging fintech sector which wants access to those deposits as well.

The Senate is expected to exercise the nuclear option today and eliminate the filibuster for Supreme Court nominees. Neil Gorsuch will probably be confirmed on Friday.

30 Responses

  1. Mitch just turned the key and launched.

    Like

    • Replacing RBG with Bork II is gonna be fun..

      Like

    • boom.

      Like

    • the best part is the lefty reaction — this is going to come back to bite you, you know.

      uh huh.

      Like

      • Long term maybe. I always thought that anti-majoritarian rules benefited the Republicans more than Democrats because of the nature of their ideology.

        Theoretically it should also make it easier for Republicans to repeal entitlements but as we see in practice, that hardly ever happens even when they have full control.

        Also, in terms of coming back to bite you, this is actually the bite back from Reid going nuclear in 2013. So they should look in the mirror.

        Like

  2. Good read:

    “The “Grand Bargain” at Risk: What’s at Stake When the President Alleges Politics in Intelligence
    By Jack Goldsmith, Benjamin Wittes
    Tuesday, April 4, 2017, 2:39 PM”

    https://www.lawfareblog.com/grand-bargain-risk-whats-stake-when-president-alleges-politics-intelligence

    Like

  3. Pretty good:

    “On April Fools’ Day, the Russian Foreign Ministry posted on its Facebook page a sendup of a Russian Embassy’s answering machine.

    According to Tass, the recorded message could be heard in Russian and English: “You have reached the Russian Embassy. Your call is very important to us. To arrange a call from a Russian diplomat to your political opponents, press 1. To use the services of Russian hackers, press 2. To request election interference, press 3 and wait until the next election campaign. Please note that all calls are recorded for quality improvement and training purposes.””

    https://www.washingtonpost.com/news/worldviews/wp/2017/04/05/a-fake-diplomatic-cable-has-the-state-department-fuming/

    Like

  4. This guy is the virtue signalling master:

    “His application essay for Stanford? Writing #BlackLivesMatter 100 times. He got in.
    By Susan Svrluga
    April 6 at 8:30 AM”

    https://www.washingtonpost.com/news/grade-point/wp/2017/04/06/his-application-essay-for-stanford-writing-blacklivesmatter-100-times-he-got-in/

    Like

    • Sounds like he had an impressive resume, but he was connected – he had dinner with obama, FFS. He probably could have written it in crayon and the admissions committee would call it daring, provocative, and visionary.

      And I think the virtue signalling is happening at the Admissions Committee level…

      Like

  5. I see these sentiments all the time on lefty sites.

    Like

  6. This is gonna upset the freaks at PL.

    http://www.zerohedge.com/news/2017-04-06/noam-chomsky-calls-democrats-obsession-russia-conspiracy-theories-joke

    Might want to get their local police to do Welfare Checks. Chomsky’s their God.

    Like

  7. Boy, Putin is getting his money’s worth, with the US now destroying Syrian airbases…

    Like

  8. You WILL like Amy Schumer’s comedy or else you are sexist, Entertainment Nazi declares.

    http://www.instyle.com/celebrity/amy-schumer-not-too-vulgar-sexist?xid=soc_socialflow_twitter_instyle

    Like

  9. Because it’s Friday and I caught it on the way into work

    Like

  10. This thing’s a real eye roll.

    https://mobile.nytimes.com/2017/04/06/us/trump-russia-cia-john-brennan.html?referer=http://hotair.com/headlines/archives/2017/04/07/c-i-a-had-evidence-of-russian-effort-to-help-trump-earlier-than-believed/

    This made me laugh,

    So far, no proof of collusion has emerged publicly.

    “Publicly.”

    Weird that the word “publicly” is missing from this part.

    the investigation and toward what Mr. Trump has said, with no evidence, was President Barack Obama’s wiretapping of phones in Trump Tower during the presidential campaign.

    Prolly just an oversight.

    Hunh, there’s that word again,

    “It was not until early December, a month after the election, that it became publicly known in news reports that the C.I.A. had concluded that Moscow’s motivation was to get Mr. Trump elected.”

    Like

  11. Jfc.

    Like

    • Leave out the “appropriation” nonsense, and the author is just calling out rich hipsters for slumming and pretending to be radical while doing it.

      It’s actually not a bad piece. if you disregard the title.

      Like

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