Morning Report: Fed Beige Book points to strong labor market 3/8/18

Vital Statistics:

Last Change
S&P Futures 2729.3 6.0
Eurostoxx Index 374.0 1.3
Oil (WTI) 61.2 0.0
US dollar index 83.6 0.1
10 Year Govt Bond Yield 2.87%
Current Coupon Fannie Mae TBA 102.25
Current Coupon Ginnie Mae TBA 102.5
30 Year Fixed Rate Mortgage 4.4

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

Donald Trump is set to impose tariffs on steel and aluminum, however there is talk of exempting Canada and Mexico from them (which is where we get most of our foreign steel to begin with). That exemption will be used as leverage to renegotiate NAFTA. So far, the trade war is largely symbolic – Trump tweeted that he wanted to see a $1 billion decrease in our trade deficit with China, which is about $375 billion. In other words, it is a drop in the bucket, and all for show. That might have been an error however, some reports are saying he meant $100 billion, which probably makes more sense. That said, stocks are taking the trade war in stride, and bonds seem to have found a level here.

Initial Jobless Claims rose to 231k last week from 220k. Job outplacement firm Challenger, Gray and Christmas reported that companies announced 35,369 job cuts in February.

The overall economy grew at a modest to a moderate pace in January and February, according to the Fed’s Beige Book survey. With regard to employment, it said: “On balance, employment grew at a moderate pace since the previous report. Across the country, contacts observed persistent labor market tightness and brisk demand for qualified workers, as well as increased activity at staffing placement services. Several Districts reported continued worker shortages across most sectors, with contacts often mentioning shortages in the construction, information technology, and manufacturing sectors. In many Districts, wage growth picked up to a moderate pace. Most Districts saw employers raise wages and expand benefit packages in response to tight labor market conditions. Contacts in a few Districts conveyed reports of modest increases in compensation following passage of the Tax Cuts and Jobs Act.” The increases in wage inflation are a good sign for the economy overall, but not so much for interest rates. The Street is looking for a strong reading in wage growth in tomorrow’s Employment Situation Report: an increase of 2.9% YOY.

Buyer sentiment fell last month, according to the Fannie Mae Home Purchase Sentiment Index. “Volatility in consumer housing sentiment continued into February, with the new tax law beginning to impact respondents’ take-home pay and the stock market creating negative headlines due to early-month turbulence,” said Doug Duncan, senior vice president and chief economist at Fannie Mae. “Additionally, consumers’ expectations for higher mortgage rates suggest that consumers expect the Fed to hike rates a few more times in 2018. We will continue to track how consumer housing attitudes trend in the coming months as these various market forces play out.”

6 Responses

  1. Other news from California – The Menace of Wild Turkeys

    East Bay residents have flocked to support a gang of wild turkeys that have been menacing the John Muir Health Medical Center in Concord, expressing concern and distress over a plan to forcefully remove and euthanize the birds.

    Ben Drew, a Muir Center spokesman, said the turkeys had become increasingly aggressive toward patients in the last year. The turkeys have regularly trapped people in their cars, swarmed them and pecked at their windows. The turkeys have also engaged in standoffs with patients entering the medical center.

    “We have looked for more than a year to find ways to address the situation. We’ve tried turkey repellents, urine from predators of turkeys,” Mr. Drew said. He said that the medical center had worked with county animal control, California’s Fish and Wildlife Department, and the federal Department of Agriculture. And yet, the turkeys persisted. “The last step was looking at having the U.S.D.A. trap and remove the turkeys. That’s what we were starting to implement,” said Mr. Drew. But a public outcry followed.

    “When I learned they might be trapping them and euthanizing them, that makes me sad,” one woman, Cassie Zola, told the local NBC affiliate. “We go on our morning walks, and we see them. Our son Jaxon loves to wave at them. He actually knows how to do a turkey call.”

    Mr. Drew said on Wednesday that the center had abandoned its plan and was instead working with emergency wildlife crews to relocate the birds. “We certainly heard the concerns associated with that and recognize the feelings of our neighbors,” he said.

    Liked by 1 person

  2. The internet and 24/7 cable news are mixed blessings. See:

    https://www.washingtonpost.com/news/morning-mix/wp/2018/03/08/conspiracy-theorists-harass-sutherland-springs-churchgoers-pastor-whose-daughter-was-killed/?utm_term=.44182b500c71

    Arseholes like these – conspiracy theorists of all political and religious stripes – used to stay in their own little worlds.

    Liked by 1 person

  3. The Incumbent Protection Act of 2018

    https://newrepublic.com/article/147156/ban-facebook-elections

    Liked by 1 person

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