Morning Report: Out: NAFTA. In: USMCA

Vital Statistics:

 

Last Change
S&P futures 2933 14.75
Eurostoxx index 384.63 1.45
Oil (WTI) 73.2 -0.09
10 year government bond yield 3.09%
30 year fixed rate mortgage 4.71%

 

Stocks are higher this morning after NAFTA was saved over the weekend. Bonds and MBS are down small.

 

Canada and the US reached an agreement late last night to keep Canada in NAFTA (which will be renamed). The biggest change in NAFTA makes it harder for automakers to build in Mexico, where labor is cheaper. Canada got to keep a trade dispute mechanism. The treaty will go to Congress for approval. “It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduce Trade Barriers to the U.S. and will bring all three Great Nations closer together in competition with the rest of the world,” wrote Trump last night. There is a press conference scheduled for 11:00 am.

 

Manufacturing continues to impress, with the ISM survey coming in at 59.8. New orders decelerated, while production and employment accelerated. Tariffs continue to weigh on manufacturers, and the clarity of having NAFTA (sorry USMCA) off the table should help somewhat, but we still are nowhere near any sort of resolution with China. Still, the market is strong, and labor issues remain. Wages are going to increase. They have to.

 

The CFPB’s head of fair lending is under fire for blog posts in the past, where hate crimes were discussed. The blog post in question is a mock legal debate – hardly an inflammatory screed – and is largely a thought crime for entertaining the notion that hate crimes are often hoaxes. Still, some of the employees at the CFPB are having issues with it. Ultimately, most of the CFPB staffers are holdovers from the Cordray “push the envelope” days, and they are chafing under the new approach of the CFPB – “enforce the law as written and then stop.”

 

This should be a big week ahead with the jobs report on Friday and a lot of Fed-speak. The snapback rally in the 10 year appears to be over, and the new NAFTA agreement definitely points to more expensive cars in the future. That could be offset by lower ag prices, but we will see. Don’t know how lumber will be affected either, but building materials are big inputs to inflation, especially housing inflation.

 

Mortgage rates increased by 3 basis points during September, making this the 10th month in a row where they have increased. This is affecting affordability, and the share of homes selling above their listing price declined. The drop is mainly in the super hot markets on the West Coast, but there is no doubt that home price appreciation is moderating. Either wages have to catch up or home prices are going nowhere for a while. With rates pushing 5%, will we see a slowdown in housing? Probably not – Zillow estimates that 6% is the number to watch.

 

mortgage rate

 

Construction spending increased by a hair in August, increasing 0.1% MOM. On a YOY basis, we are still up 6.5%. Residential construction fell, and was up only 4.1% YOY. Where was the activity? Office and commercial.

 

The Atlanta Fed cut their third quarter growth rate estimate to 3.6% from 3.8%. Still think consumption could surprise to the upside for the year, but want to hear what the retailers report for back to school.

 

 

28 Responses

  1. Will be interesting to see if the new trade deal can break through the Kavanaugh stuff. My guess is only the business press is going to care…

    Like

  2. The biggest change in NAFTA makes it harder for automakers to build in Mexico, where labor is cheaper.

    So . . . where are the labor unions gonna fall vis-a-vis Trump? What are and what have the Democrats been doing to keep union support (outside of public sector unions)?

    Like

  3. “It is a great deal for all three countries, solves the many deficiencies and mistakes in NAFTA, greatly opens markets to our Farmers and Manufacturers, reduce Trade Barriers to the U.S. and will bring all three Great Nations closer together in competition with the rest of the world”

    He sounds just like Hitler!

    I mean, seriously. I get Trump can sound incoherent and tweets too much but how is the Party of Grievance and Resentment going to be able to beat this stuff? What are they offering as an alternative? A return to meek civility as we bow and scrape to the rest of the world? More non-white, non-male tribalism?

    And I know that might be sufficient but . . . in terms of people who actually show up and vote, in contrast to those who bitch on Twitter and Facebook, I feel the Democrats are offering very weak tea by comparison to Trump’s MAGA approach.

    Like

  4. ” for entertaining the notion that hate crimes are often hoaxes.”

    Christ on a cracker. They are. They obviously are. And do none of these people understand economics (yes, I realized that was a stupid question even as I was typing it). There are incentives to hoax hate crimes, and so people respond to those incentives. Sheesh.

    Ultimately, most of the CFPB staffers are holdovers from the Cordray “push the envelope” days, and they are chafing under the new approach of the CFPB – “enforce the law as written and then stop.”

    Brent,

    Is there nothing that can be done to get rid of those people? I assume the agency is designed so they can’t be fired or laid off “at will”?

    Like

  5. The only winning move in the diversity/representation game is not to play.

    There will always be a “more woke than thou” contingent.

    “Is ‘Fantastic Beasts 2’ racist? Not quite.

    By Mili Mitra
    Digital producer and writer
    October 1 at 1:51 PM”

    https://www.washingtonpost.com/news/act-four/wp/2018/10/01/is-fantastic-beasts-2-racist-not-quite/

    Liked by 1 person

  6. So apparently #killkavanaugh is a trending twitter hashtag.

    https://pjmedia.com/instapundit/308954/

    Ah, those compassionate and empathetic progressives. Thank goodness the likes of Alex Jones has been banned from Twitter.

    Liked by 1 person

    • That’s just a political statement!!

      I feel like deeply ideological tribes that are dominant in an area (as they are within Google and Twitter) don’t understand the idea of Pyrrhic victories.

      It’s not just the censorship, which is bad enough, but the uneven application and obvious bias that’s ultimately going to end with them hemorrhaging users. Not that they can’t survive with half their previous user base on Facebook and Twitter, but it’s not exactly ideal for them, either.

      Like

  7. TCB

    Like

  8. I agree with York here but in full disclosure if he’d of butt chugged a beerbong in front of the committee he would have been confirmed on the spot.

    A lesson for Judge Barrett, Vodka douching will garauntee instant confirmation.

    Like

    • That focus just goes again to how the western Left are the new puritans. They’re modern Victorians. And their desire to essentially admit spectral evidence into these hearings makes them almost literal analogs to Salem’s witch-hunters.

      Ironic!

      But clearly an impulse wired deep into human nature.

      Like

      • KW:

        But clearly an impulse wired deep into human nature.

        Not mine.

        Like

        • Wouldn’t be in everybody’s, obviously. But to be so common and recurrent–despite the obvious problems–suggests it manifests with an almost biological recurrence. To me, anyway.

          Fractals. Chaos!

          Not everybody has blue eyes, either.

          Like

        • KW:

          Not everybody has blue eyes, either.

          True, and I wouldn’t say that having blue eyes is wired deep into human nature.

          Like

  9. Someone needs to demand an FBI investigation of themselves.

    Dude was balls-deep in guts in the Nam.

    Like

  10. Welp, there goes Judge’s shot at the court.

    Like

  11. I’m curious what their polling is telling them if the Democrats have moved off of attempted rape and on to ice throwing.

    Like

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