Morning Report: Durable Goods Orders flattish

Vital Statistics:

  Last Change
S&P futures 4,483 1.2
Oil (WTI) 68.03 0.95
10 year government bond yield   1.30%
30 year fixed rate mortgage   3.05%

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


Durable goods orders fell 0.1% last month. Ex-transportation, they rose 0.7%. Core Capital Goods (which is a proxy for business capital expenditures) was flat. “Core capital goods orders have made a remarkable comeback over the past year and have shown little signs of slowing,” said Sam Bullard, a senior economist at Well Fargo in Charlotte, North Carolina. “While overall durable goods orders may cool in the coming months as consumers pull back on goods spending and the auto sector contends with supply problems, businesses’ desire to invest and restock inventories should provide a solid demand floor.”


Mortgage Applications rose by 1.6% last week as purchases increased 3% and refis increased 1%. “Treasury yields fell last week, as investors continue to anxiously monitor if the rise in COVID-19 cases in several states starts to dampen economic activity,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting.  “Mortgage rates slightly declined as a result, with the 30-year fixed rate decreasing for the first time in three weeks. Lower rates led to an increase in refinance applications, with government loan applications jumping 10 percent to the highest level since May 2021.”


Independent mortgage banks reported a net gain of $2,023 on each loan they originated in the second quarter, down from $3,361 in the first quarter. Average pre-tax production profit slipped to 73 bps, down from 124 bps in Q1 and 167 bps a year ago. Average volume fell 6% QOQ to $1.35 billion. Secondary marketing income fell to 297 bps from 331 in Q1.


iBuyers and fintechs are pushing up the percentage of cash purchases, according to NAR. Cash sales were 23% of all sales, compared to 15% a year ago. There are also several types of companies which will back a buyer with cash. For example, OpenDoor launched a program in March which will allow the buyer to submit a non-contingent offer on a house. This is separate from companies like Zillow which will buy houses outright.


Aid to landlords and renters continues to be disbursed at a slow pace. Since December, just $4.7 billion of the $46 billion allocated to rental aid has been delivered to renters and landlords. The program is managed by Treasury, however it relies on state and local governments to help distribute it, which is causing bottlenecks.


It turns out that the labor shortage isn’t strictly an American problem. China has the same issue as well. This was exacerbated by the country’s one-child policy. This has the potential to create global wage-push inflation, which we haven’t seen since the 1970s.

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