Morning Report: First quarter GDP falls 4.8%

Vital Statistics:


Last Change
S&P futures 2915 48.1
Oil (WTI) 15.71 3.29
10 year government bond yield 0.61%
30 year fixed rate mortgage 3.43%


Stocks are higher this morning despite a disappointing GDP print. Bonds and MBS are up.


First quarter GDP fell 4.8% as the COVID lockdown depressed consumer spending, which fell 7.6%. The price index rose 1.3%, and that will be a number to watch going forward. Inflation is too much money chasing too few goods. We have managed to sidestep inflation in the past because shortages weren’t a problem. Now they are. Do you remember paying a buck a roll for TP last year? How about chicken? It averaged $3.11 a pound last year. At the local Stop and Shop it is now $3.80, and with the Tyson closures it will go higher. The black swan out of this whole thing could be a resurgence of inflation, right when that is the last thing the economy needs. 


The FOMC will make their announcement at 2:00 pm today. Not sure what they can say,(Information received since the Federal Open Market Committee met in March seems to indicate the economy has hit a brick wall and is sinking like an anvil….) and I can’t see it being market-moving. The mortgage industry would love to see something about a servicing advance repo line, but aside from accepting newer forms of collateral I don’t think there is much more they can do.


Mortgage applications fell 3.3% last week as purchases rose 12% and refis fell 7.5%. The refi market continues to tighten as investors add overlays to cash-outs. The strength in the purchase market is encouraging. Separately, the homeownership rate hit 63.5% in the first quarter, the highest since 2013. I think for many urban millennials with families, the COVID Crisis will trigger a flight to the suburbs, which should bump up the homeownership rate going forward.


According to a NPR poll, half of Americans have been financially affected by the Coronavirus. If that is the case, then forbearance numbers are going up.


Consumer confidence fell from 119 to 87, which was worse than expected.



11 Responses

  1. From Prof. Duhon, a virus researcher in UT’s Pharmacology Department:

    Summary: there are different variants of the virus that replicate better than others but the overall strain hasn’t mutated meaning vaccine should still be viable, West Coast patients seem to be doing better than East Coast, Reinfection is likely not happening despite media headlines, Ibuprofen isn’t associated w/ worse outcomes, Texas is doing better testing-wise and is likely at the plateau mortality-wise.

    He goes on at length to speculate on the difference in CA and NY outcomes, showing what existing data suggests, but conceding the data is too limited and untested to make hard conclusions.

    My daughter the pharmacist was a RA for him back in the day and receives his daily briefings and she forwards them to me.

    My brother-in-law, Frank, is a retired air quality control engineer and as recently as 14 years ago was on the National Certifying Board, so he has recognized chops in that profession. He suggested a simpler explanation for the CA – NY difference, based on building engineering.

    Frank says apartment units are designed with units opening to hallways. Older units were never engineered for pressure equalization, like skyrise newer buildings. Apartments always tend to have negative pressure, due to the necessity to vent cooking and bath gasses. The adjacent hall is not pressurized. Thus atmosphere from the hall infiltrates the apartments. Ultimately, virus in the hall will be in all the apartments.

    Makes sense to me.


  2. FYI – For the Star Wars fans here the final four episodes of the Clone Wars are must see.

    Liked by 1 person

    • it’s been really good.
      the first few episodes were ok.

      but i was mad watching last week’s episdode, i kept thinking: how good could have Revenge of the Sith been.

      Liked by 1 person

      • Yep. And there are two more left. But bringing Ray Park back was genius and I really, really hope they do justice to a live action Ahsoka Tano in Season 2 of The Mandalorian.

        Dave Filoni should run all things Star Wars.He’s worked the closest with George Lucas.

        There’s also enough unused scripts to do a chronologically out of order Season 8 with a major Asaj Ventress arc. Who I would also love to see in The Mandalorian, but she’s dead by that time.

        Liked by 1 person

  3. Corona is distracting us from lots of otherwise interesting developments, not the least of which is the continuing developments in the Flynn case. It seems increasingly obvious that he was stitched up by the FBI.


    • I feel like there is very little actual news anymore–and most of the modern media seems dedicated to either censoring, ignoring, or just can’t understand actual things going on.

      The video of the two doctors discussing their opinions of the Coronavirus thing was taken down from YouTube for violating community standards.

      There was clearly all sorts of interesting crap going on with the Russia investigation and the Flynn case that needs more general exposure. Unfortunately, our news media is either so partisan or so incompetent or both . . . but general disclosure of actual news just doesn’t happen, or at least most of the time.

      The mainstream press more and more seems to me to be a source of obfuscation and distraction that reporting of actual significant news.


    • Orange Man Bad justifies everything.


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