Morning Report: Janet Yellen is constructive on the economy 10/16/17

Posted on October 16, 2017 by Brent Nyitray

Vital Statistics:

Last Change
S&P Futures 2554.8 2.0
Eurostoxx Index 391.7 0.3
Oil (WTI) 52.3 0.8
US dollar index 86.4 0.1
10 Year Govt Bond Yield 2.90%
Current Coupon Fannie Mae TBA 102.875
Current Coupon Ginnie Mae TBA 103.938
30 Year Fixed Rate Mortgage 3.86

Stocks are higher this morning on no real news. Bonds and MBS are down small.

Janet Yellen discussed the strong economy on Sunday, and again hinted that we will see another rate hike in December. The hurricanes will probably depress growth slightly, but the economy should rebound by year’s end. The consumer is still pretty strong, according to Friday’s retail sales report. Persistently slow inflation has been a surprise, however.

Manufacturing was strong in the NY area according to the Empire State Manufacturing Survey. The index came in at 30, which is the highest reading in 3 years. An increase in shipments and hiring drove the increase, which is one data point that shows the increase in sentiment indicators is actually translating into more business.

Boston Fed President Eric Rosengren thinks we might see 3-4 rate hikes in 2018. This assumes that employment continues to rise and inflation begins to pick up. Friday’s consumer price index report was weak, however with core inflation rising 0.1% MOM and 1.7% YOY, below the Fed’s 2% inflation target.

This week is the 30 year anniversary of the Crash of 87, and given the run up in the market, people are looking for another one. A lot will depend on earnings season, which is just starting. Given that the market is now dominated by high frequency traders that basically turn off their machines once volatility spikes you could see selling into a vacuum. Cheap commissions and sub-penny bid/ask spreads have pretty much eliminated the market-makers and the NYSE specialist from the game.

Average home sizes are falling in the US after rising for pretty much 3 decades. The average square footage decreased to 2420 square feet from the record of 2520 set in 2015. The Baby Boomer McMansion trend has run its course and builders are beginning to focus on starter homes in order to attract the Millennials.

Filed under: Economy, Federal Reserve, Morning Report |

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27 Responses

  1. Let the mutherfuker burn!, on October 16, 2017 at 11:59 am said:

    Liked by 1 person

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  3. Let the mutherfuker burn!, on October 16, 2017 at 1:16 pm said:

    Heckuva job, Obama.

    He’s pleading guilty without a sentencing agreement.

    I remember when I was told the chances of Bergdahl being courtmartialed as being “slim to none.”

    https://www.yahoo.com/news/bergdahl-expected-plead-guilty-desertion-case-monday-074707026.html

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    • jnc4p, on October 16, 2017 at 1:25 pm said:

      This was nutty:

      “The desertion case was tricky to make. According to Bergdahl’s own account, confirmed by an internal military investigation led by Maj. Gen. Kenneth Dahl, Bergdahl’s goal wasn’t to disappear into the Afghan wilderness or (as Trump alleged) turn traitor and defect to the Taliban.

      Instead, he had a plan to blow the whistle on (apparently largely imagined) “officer incompetence” and mismanagement in his unit. He aimed to run across 20 miles of hostile territory to get to a forward operating base (FOB) called Sharana and inform the general there about what was going on.

      He also planned to report and uncover new intelligence on the Taliban. “When I got back to the FOB, you know, they could say, ‘You left your position,” he said in comments aired on Serial. “But I could say: ‘Well, I also got this information. So what are you going to do?’”

      This was a terrible, terrible plan — as became clear when Bergdahl was captured by the Taliban roughly a day after his disappearance.”

      https://www.vox.com/world/2017/10/16/16482270/bowe-bergdahl-guilty-plea-desertion-serial

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    • markinaustin, on October 16, 2017 at 1:25 pm said:

      Did I suggest that? I may have thought that at one time. I don’t recall if I shared the thought with anyone but my next door neighbor. It always depended on the facts, of course, but I remember when the facts looked better for Bergdahl, early on.

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