Morning Report: Odds of a June hike fading 5/18/17

Vital Statistics:

Last Change
S&P Futures 2350.5 -7.0
Eurostoxx Index 387.6 -3.5
Oil (WTI) 48.5 -0.5
US dollar index 89.0 0.1
10 Year Govt Bond Yield 2.19%
Current Coupon Fannie Mae TBA 103.27
Current Coupon Ginnie Mae TBA 104.21
30 Year Fixed Rate Mortgage 4.03

Stocks are following through on yesterday’s sell-off. Bonds and MBS are up again.

Initial Jobless Claims came in at 232k last week which shows that firms are hanging onto their employees. Claims are at a 28 year low. Meanwhile, the Philly Fed Manufacturing Index put in another strong showing.

The index of leading economic indicators increased 0.3% in April after a 0.3% increase in March.  “First quarter’s weak GDP growth is likely a temporary hiccup as the economy returns to its long-term trend of about 2 percent. While the majority of leading indicators have been contributing positively in recent months, housing permits followed by average workweek in manufacturing have been the sources of weakness among the U.S. LEI components.”

The DOJ named ex-FBI Director Robert Meuller to conduct the Russia / DJT investigation. This should (in theory) quiet things down for a while, as it satisfies a key demand from Democrats that someone independent of the White House conduct the investigation. The key question: Is this Watergate or Whitewater?

The DJT turmoil has affected the market’s handicapping of the next FOMC meeting. The odds of a June hike have slipped from 80% to 60%.

Meanwhile, The Bernank finds it strange that markets ignore political risk until the last moment. He also thinks DJT should re-nominate Janet Yellen and downplayed the market risk from the Fed tapering its reinvestment policy.

Household debt has surpassed its 2008 peak, according to the Fed. It came in at $12.7 trillion as mortgage debt and student loan debt increased. Of course the difference between 2008 and today is that home equity is much higher, so it isn’t necessarily a huge cause for alarm.

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