Morning Report: Fed Day

Posted on March 20, 2019 by Brent Nyitray

Vital Statistics:

 

Last Change
S&P futures 2851 -1.25
Eurostoxx index 382.92 2.82
Oil (WTI) 58.48 0.39
10 year government bond yield 2.60%
30 year fixed rate mortgage 4.27%

 

Stocks are higher this morning as we begin the FOMC meeting. Bonds and MBS are flat.

 

The FOMC decision is set to be announced at 2:00 pm EST. Be careful locking around that time. They aren’t going to raise interest rates, but the focus will be on the dot plot and their interest rate forecast for 2019. There will also be interest in the size of the balance sheet, but it won’t be market moving.

 

The stock market has been rallying on hopes that the Fed will be taking 2019 off. Note that FedEx reported disappointing numbers, which is a canary in the coal mine for the global economy. The stock and bond markets have been sending different signals about the economy, with the stock market rising (signalling strength) and interest rates falling (signalling weakness). Part of this has been due to global growth concerns – especially in Europe and China. Global weakness doesn’t necessarily translate into a recession for the US, but it is a reach to think it won’t affect us at all.

 

Mortgage Applications rose 1.6% last week as purchases rose 0.3% and refis increased 4%. Mortgage rates drifted lower and are at the cheapest in a year.

 

The NAHB / Wells Fargo Housing Market Index was flat at 62 as we kick off the Spring Selling Season. Sales ticked up, but traffic is way down. Overall, the new home sales market is similar to where we left off in fall. We will get a read on existing home sales this Friday. We are seeing some evidence of cooling in housing markets, especially in the Northeast. According to the Redfin competitive numbers, places like Greenwich CT are at 9 on a scale of 1 – 100. Even erstwhile hot markets like San Diego have been cooling. The heat is in the laggard markets, with places like Harrisburg PA and Indianapolis doing very well.

 

greenwich

Indianapolis

 

Filed under: Economy, Morning Report |

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4 Responses

  1. Kevin S. Willis, on March 20, 2019 at 4:38 pm said:

    From the Bloomberg article you linked:

    However, as the U.S. economy slows from an already weak first quarter and the combined weight of nine rate increases over the past three years, it would be time to reduce presence in equities and increase allocation to Treasuries. Equities are reacting to short-term optimism, but the bond market appears to anticipate problems in 2020 and 2021.

    What’s your take on that? Is the bond market really anticipating problems in 2020 and 2021?

    Also, is CNN telling the truth about the cost of Brexit?

    https://www.cnn.com/2019/03/20/business/brexit-economy-bank-assets/index.html

    $1.3 trillion and 7,000 finance jobs are leaving Britain because of Brexit

    I figured you’d know if anyone did.

    Like

    Reply
    • Brent Nyitray, on March 20, 2019 at 7:55 pm said:

      Scott’s your man on Brexit.

      As far as the economy, the talking heads consistently overestimated the economy’s strength during the obama years and have consistently underestimated the economy’s strength during the trump years.

      Even the Fed has been doing that.

      Wishful thinking, IMO

      Like

      Reply
    • jnc4p, on March 21, 2019 at 9:56 am said:

      “Also, is CNN telling the truth about the cost of Brexit?”

      No they aren’t. This is the same sort of analysis that predicted a depression due to the sequester.

      Like

      Reply

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