Morning Report: Rocket disappoints

Vital Statistics:

S&P futures4,159-0.8
Oil (WTI)65.33-0.37
10 year government bond yield 1.59%
30 year fixed rate mortgage 3.15%

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

Initial Jobless Claims fell slightly to 493k last week. Meanwhile outplacement firm Challenger, Gray and Christmas reported that there were 22,913 announced job cuts last week.

Productivity increased 5.4% in the first quarter as output increased 8.4% and hours worked rose 2.9%. Unit Labor Costs fell 0.3% as compensation rose 5.1% and productivity rose 5.4%.

Rocket is getting pummeled this morning after reporting first quarter earnings and a slew of investment banks downgraded the name. Volume was up 100% compared to the first quarter of 2020 to $103.5 billion. Earnings per share came in at $1.07. Gain on sale margins increased 49 basis points compared to a year ago to 3.74%. Not sure why the stock is down 14% pre-open, but I haven’t checked out the conference call yet. FWIW, the Street is in a “shoot first and ask questions later” mode when it comes to the mortgage bankers.

New Rez reported first quarter earnings of $0.65 per share. Origination rose 14% sequentially to $27.2 billion. Gain on sale margin slipped QOQ to 143 basis points compared to 157 in the fourth quarter. The company is guiding for Q2 origination to fall to $22 to $24 billion. The company sees its servicing portfolio driving results going forward. The stock is unchanged this morning.

Despite the lousy sentiment for the mortgage banking sector, Genworth is IPO-ing its mortgage insurance arm, setting a price range of $22-$24 per share.

A Federal Judge ruled that the Center for Disease Control overstepped its bounds when it imposed a foreclosure moratorium last year. “It is the role of the political branches, and not the courts, to assess the merits of policy measures designed to combat the spread of disease, even during a global pandemic,” the order states. “The question for the Court is a narrow one: Does the Public Health Service Act grant the CDC the legal authority to impose a nationwide eviction moratorium? It does not.” This ruling won’t affect any state-level moratoriums.

Fed Vice Chairman Richard Clarida said that the Central Bank is comfortable with current policy. “We’re still a long way from our goals, and in our new framework, we want to see actual progress and not just forecast progress,” Clarida said. “As we go into next year and beyond, if there are unforeseen, persistent upward pressures on prices that would move inflation to a level inconsistent with our mandate, we would use our tools to bring it down,” he said. “We don’t see overheating as our baseline. Of course, in any outlook there’s risks.”

3 Responses

  1. Mark, I’d be interested in your take on this article about Austin’s Proposition B.


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