Morning Report: GDP comes in better than expected

Vital Statistics:

 

Last Change
S&P futures 2691 21.65
Eurostoxx index 356.69 4.38
Oil (WTI) 67.32 -0.28
10 year government bond yield 3.10%
30 year fixed rate mortgage 4.93%

 

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

 

The 10% retracement level in the S&P 500 held on Friday and bond yields were around 3.08 when sitting at that level. As usual, MBS lagged the moves in the bond markets, waiting for confirmation.

 

The first estimate for third quarter GDP came in at 3.5%, which was higher than the 3.3% Street estimate. Consumption was strong, but investment growth came in weaker than previous quarters. The biggest hit to GDP came from trade, which subtracted an estimated 1.8 percentage points from the number as exports fell, while imports were largely unaffected by tariffs. As usual, housing was a weak spot.

 

Housing economist Robert Shiller notes that housing is weak, however he believes we aren’t looking at another huge slowdown. Housing never fully recovered from the bubble, and inventory is tight. While prices have recouped the losses from the bubble years, we are nowhere near bubble territory.

 

We do have some data this week, with productivity and costs, personal incomes and outlays and the jobs report on Friday. That said, bonds seem to be reacting to the movements in the stock market these days, so it is hard to say these will be market-moving reports.

 

Credit card companies are beginning to restrict credit, or at least pull back the reins a little. Capital One’s CEO believes “the economy is almost too good to be true,” and is beginning to lower credit limits. Credit card issuers are usually the first to react to a tightening in credit, so this bears watching.

14 Responses

  1. It’s a short term perspective, but housing prices peaked in my metro [Austin-Round Rock] 4 months ago according to Austin BOR.

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  2. We completed a whirlwind east coast trip Thursday. In Westchester County we visited Rosanne’s mom in the nursing home – she doesn’t know Rosanne any more. When in the mood she answered every question or conversational gambit “Who the hell knows?”

    Visited Rosanne’s bro in PA. He is an engineer soon to retire. He has the outlines of a plan: send “The Wall” money to PR, then divert the wannabe refugees from the south to PR if they promise to work on the rebuilding effort under the Army COE. Feed, shelter, and school them while they wait for their hearings – in 4 years they might get PR rebuilt. After 4 yrs, have the hearings, keep the good ones, or not.

    Visited my cousins in Baltimore. Did Rosanne’s bucket list tours of the WH and the Capitol. Had good weather.

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    • Wouldn’t it be better to use American labor to both build the wall and Puerto Rico? There are plenty of African Americans that are unemployed that could use the work. Also, a lot of former felons struggling employment wise. Why isn’t this a better alternative?

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      • My cousin wants that labor pool to rebuild Baltimore.

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        • Well, there are other pools of unemployed Americans in other cities. I’m still confused as to why illegals should be solicited to in any way. Doesn’t that encourage more caravans?

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        • Doesn’t that encourage more caravans?

          Maybe. Spending on a wall on our side of the RG River steals property and water access from Texas by the Feds. Fuck that. Just use drones and more border patrol.

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        • There won’t be a wall on the RG. If there were to be I’d put it in the Mexican side, fuck their sovereignty.

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        • Female cousin in Baltimore is a PhD biochemist and smart and sweet natured. Lamented the gun death toll in Baltimore and blamed it on VA “lax” gun laws. When I pointed out that VA does not have the gun homicide problems of Baltimore she was very defensive. It got worse when I said Austin had 23 gun homicides so far this year while Baltimore has had that many in a weekend, but that I and all my neighbors own guns. I am now her red necked cousin from Texas. And I believe in enforcing and supporting ATF enough to enforce current gun laws, closing the show exception, and gun safety training and background checks. I could even buy into limited magazines. So I know that I am not a gun nut. Just don’t tell me I can’t own/keep my shotgun because Baltimore.

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        • “I am now her red necked cousin from Texas.”

          Welcome to the club. Had I known you were on the East coast, I would have seen if I could have made it to DC to catch up.

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        • We thought about adding two more days so I could see my HS buddy in Potomac and you in Richmond. Couldn’t do it this time.

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  3. Interesting read:

    “Cesar Sayoc’s Home Was Foreclosed on by Steve Mnuchin’s Bank, Using Dodgy Paperwork
    David Dayen

    October 26 2018, 6:07 p.m”

    https://theintercept.com/2018/10/26/cesar-sayoc-foreclosure-steven-mnuchin/

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    • I didn’t read the article, did it assert that he had not defaulted on his loan?

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      • No, but the interesting thing is Dayen linking several of the people who received bombs to the foreclosure.

        For example, Soros was an investor in the bank that foreclosed on him.

        He doesn’t come right out and say this, but the tenor of the article is that this is chickens coming home to roost from the way the financial crisis was handled.

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