Morning Report: Jerome Powell says it is time to retire the term “transitory.”

Vital Statistics:

  Last Change
S&P futures 4,621 58.2
Oil (WTI) 67.52 2.28
10 year government bond yield   1.48%
30 year fixed rate mortgage   3.27%

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

Jerome Powell sounded hawkish at yesterday’s Senate Banking Committee testimony, saying it is time to retire the word “transitory” to describe inflation. The Fed is expected to make a decision regarding a faster tapering at the mid-December FOMC meeting, which will be largely determined by the severity of Omicron.

The Fed Funds futures increased the probability of further rate hikes, and are pricing in 3 hikes in 2022, with the first one expected at the June meeting.

The new conforming loan limits are out, with the new level at 647,200. The high balance limit rises to $970,800.

ADP estimated that there were 534,000 jobs added in November. This is exactly what the Street is looking for in Friday’s jobs report.

“The labor market recovery continued to power through its challenges last month,” said Nela Richardson, chief economist, ADP. “November’s job gains bring the three month average to 543,000 monthly jobs added, a modest uptick from the job pace earlier this year. Job gains have eclipsed 15 million since the recovery began, though 5 million jobs short of pre-pandemic levels. Service providers, which are more vulnerable to the pandemic, have dominated job gains this year. It’s too early to tell if the Omicron variant could potentially slow the jobs recovery in coming months.”

Mortgage applications fell 7.2% last week as purchases rose 5% and refis fell 15%. “Mortgage rates rose for the third week in a row, reducing the refinance incentive for many borrowers,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Over the past three weeks, rates are up 15 basis points and refinance activity has declined over 18 percent. Despite higher mortgage rates, purchase applications had a strong week, mostly driven by a 6 percent increase in conventional loan applications. Conventional loans tend to be larger than government loans, and this was evident in the average loan amount, which increased to $414,700 –the highest since February 2021. As home-price appreciation continues at a double-digit pace, buyers of newer, pricier homes continue to dominate purchase activity, while the share of first-time buyer activity remains depressed.”

The ISM Manufacturing Index came in at 61.1, an increase of 0.3 from October. “The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement. All segments of the manufacturing economy are impacted by record-long raw materials and capital equipment lead times, continued shortages of critical lowest-tier materials, high commodity prices and difficulties in transporting products. Coronavirus pandemic-related global issues — worker absenteeism, short-term shutdowns due to parts shortages, difficulties in filling open positions and overseas supply chain problems — continue to limit manufacturing growth potential. However, panel sentiment remains strongly optimistic, with 10 positive growth comments for every cautious comment. “

10 Responses

  1. The Wise Latina during oral arguments yesterday in the Mississippi abortion case:

    “Will this institution survive the stench that this creates in the public perception that the Constitution and its reading are just political acts?”

    That’s rich. She is like the person who gets on a crowded elevator, let’s one rip as soon as the door closes, and then blames the people who step off at the next floor for the stench. She is a complete lowlife.


    • Nobody projects like the left


    • Is the left just being hysterical when it comes to the assertion that this will overturn RvW?

      I don’t know whether they are just being performative or there is a real risk to it.


      • Brent:

        Is the left just being hysterical when it comes to the assertion that this will overturn RvW?

        I think there is a really good chance that Roe/Casey gets overturned. I suppose it is possible that Roberts tries to craft a narrow decision that upholds the Mississippi law but falls short of outright overturning precedent, but I don’t see how it is possible. The Mississippi law seems to me to be completely contrary to the Roe/Casey regime.

        Of course, contrary to the impression that the left and the media try to convey, overturning Roe will not result in abortion becoming illegal throughout the nation. All it does is throw the issue back to state legislatures, where it actually belongs as a Constitutional matter. So the pro-choice side will just have to win at the ballot box rather than by judicial fiat.


      • I think it’s unlikely the Robert’s court is going to overturn Roe though they may basically neuter Casey. Split the difference and kind of vacate the viability standard—either say it’s much earlier or say essentially it should be up to the states to decide viability. Which doesn’t make much legal sense but I don’t see the Robert’s court wanting the brand of “We Made Abortion Illegal”.

        The left will still pitch a fit because anything that allows the Mississippi law to stand will be seen as a return to coat hangers in back alleys.


        • KW:

          I don’t see the Robert’s court wanting the brand of “We Made Abortion Illegal”.

          That is probably true of Roberts himself, but he can’t prevent it if the other 5 embrace it. And they just might.


        • I think Coney and Kavanaugh are institutional people like Roberts so I don’t think anything happens.


        • Perhaps, but I doubt they will embrace it. Thomas and Alito will but I feel like Roberts can get ACB and Kavanaugh and Gorsuch on the same page. I suppose we will know soon enough.


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