Morning Report: Third quarter GDP comes in better than expected

Vital Statistics:

 

Last Change
S&P futures 3036 0.25
Oil (WTI) 55.32 -0.24
10 year government bond yield 1.84%
30 year fixed rate mortgage 4.03%

 

Stocks are flat as we await the FOMC decisions and earnings from Facebook and Apple after the bell. Bonds and MBS are flat.

 

The FOMC decision is set for 2:00 pm. The big tariff-related slowdown that has been widely predicted doesn’t seem to be materializing. This means that the language of the FOMC statement and the press conference will take on more weight and we could see some volatility in the bond market as everyone reassesses the lay of the land. Be careful locking around then.

 

The advance estimate of third quarter GDP came in better than expected, at 1.9%, versus street expectations of 1.6%. Personal consumption expenditures drove the increase, rising 2.9%, while investment fell 1.5%. Residential fixed investment broke a 6 quarter losing streak, increasing 5.1% in the quarter. Inflation remains under control, with the headline PCE number rising 1.5%, and the core rising 2.2%.

 

GDP

 

ADP estimated that payrolls increased by 125,000 in October, which was above expectations. September’s estimate was revised downward however to below 100k. Note the 125,000 number is well above the Street estimate for Friday’s jobs report, which is forecasting an increase of only 85,000.

 

Mortgage applications increased by 0.6% in the latest MBA survey. Purchases increased 2% and refis fell 1%. “The 10-year Treasury rate rose slightly last week, as markets expected more progress toward a trade deal between the U.S. and China,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Mortgage rates increased for the second straight week as a result, with the 30-year fixed rate climbing to 4.05 percent–the highest level since the end of July. Mortgage applications were mostly unchanged, with purchase activity rising 2 percent and refinances decreasing less than 1 percent. Purchase applications continued to run at a stronger pace than last year, finishing a robust 10 percent higher than a year ago. Considering how much lower rates are compared to the end of 2018, purchase applications should continue showing solid year-over-year gains.”

 

The MBA forecasts that 2019 will be the best year for origination since 2007, at $2.06 trillion, although they expect 2020 to slip to $1.89 trillion. Although they forecast rates will remain low, they anticipate that refis will dry up in the second half and the margin pressure that bedeviled lenders in 2018 will reappear.

 

Pending home sales rose 1.5% in September, according to NAR. “Even though home prices are rising faster than income, national buying power has increased by 6% because of better interest rates,” he [NAR Chief Economist Lawrence Yun] said. “Furthermore, we’ve seen increased foot traffic as more buyers are evidently eager searching to become homeowners.” The foot traffic comment is interesting since we should be seeing a drop-off heading into the seasonally slow period.

 

The homeownership rate ticked up to 64.8% in the third quarter. This is an increase of 70 basis points from the second quarter and an increase of 40 bps from a year ago.

12 Responses

  1. After reading the WaPo’s article describing the Emergency Stay pending the presentation of the Motion to Stay the DC trial court ruling that the unredacted Mueller Report be given to the House Intel Committee, I noticed that the comments were mainly about how the 3 judge panel perverted “justice”, and also questioned why the submission on the Motion would not be until 11-15.

    I could not resist explaining that it would be almost impossible for a party in the position of the government in this case not to get a stay, and that 11-15 struck me as an expedited setting. I pointed out that I once maintained a Stay Pending Appeal of more than a year because of the crowded 5th Circuit docket in 1970, and suggested that the DC Circuit docket in 2019 could not possibly be lighter.

    I did not mention that the 3 judge panel were Obama appointees because it was irrelevant.

    Some people approved. I expected only flak.

    I am actually slightly surprised that the USA could not convince the trial court to Stay its own Order, pending Appeal. Some Judges do that out of courtesy, saving the lawyers the extra step of an emergency appeal, but some don’t, as a matter of rigid practice, leaving the burden on the lawyers moving forward. The second practice is certainly correct, while the first is certainly courteous.

    As a former practitioner, I can speak for all of us as to which judges were more well liked.

    Like

    • I prefer sanctions to war, but I prefer invading difficult nations through trade even more. Make open trade with nation X dependent on allowing certain things, perhaps ratcheting it up over time, until the difficult country is soft and weak like any European nation. Then what are they going to do? They’ll bitch on Twitter all day and obsess over reality television and things will be a lot less violent.

      Like

  2. Tom Friedman is an idiot. Sure the 1960’s had riots, assassinations, and the Vietnam War but Facebook is the real threat to the continued existence of the country.

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    • not a surprise, flathead admires China where the government can get things done without worrying about what the citizens think…

      they are totalitarians. every last one of them.

      Like

      • They are totalitarians. Somehow I find it worse than they fantasize that under the velvet-fisted rule of Tom Friedman, totalitarianism would make America great again. Because one educated individual like himself is smarter that the entire market place, and could make great decision and make everything awesome because . . . magic.

        It’s that fantasy that centralization could ever work for humans that leads to totalitarian government. That then end up mass-murdering people because it’s hard to make everything great with other people aren’t just doing what you say to realize your vision–and if they are too stupid to know what’s best for them, maybe they ought to die! It would certainly be better for the environment.

        Human beings can talk themselves into any evil when (a) they benefit personally and (b) they believe they cannot be held accountable to some higher authority.

        Like

  3. Twitter caves.

    “Twitter to ban all political ads amid 2020 election uproar
    The social network’s decision sets it apart from Facebook, which has defended its controversial policies

    By Tony Romm
    Oct. 30, 2019 at 4:41 p.m. EDT”

    https://www.washingtonpost.com/technology/2019/10/30/twitter-ban-all-political-ads-amid-election-uproar/

    Like

    • twitter is already pretty much owned by the left. not surprised…

      Like

    • I don’t have much problem with Twitter banning all political ads. I’m surprised they are doing it, because it’s basically politicians paying them all sorts of money for advertising that generally isn’t all that effective. But if they just don’t want the hassle . . .

      You would think the lesson of 2016 would be “money isn’t the most important thing”, since Clinton spent at least double what Trump did but . . . eh.

      Twitter is a cesspool. Political ads belong on Twitter. The most appropriate place for them.

      Like

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