Morning Report: Good earnings soothe the markets

Vital Statistics:

S&P futures4,103 10.0
Oil (WTI)76.49-0.59
10 year government bond yield 3.41%
30 year fixed rate mortgage 6.39%

Stocks are higher this morning after good numbers from Microsoft. Bonds and MBS are up.

Durable Goods orders rose 3.2% in March, which was well above Street expectations. If you strip out transportation, they rose 0.3%. Core Capital Goods, which can be considered a proxy for business capital expenditures fell 0.4%.

Mortgage Applications rose 3.7% last week as purchases rose 4.6% and refis increased 1.7%. “Both conventional and government home purchase applications increased last week. However, activity was still nearly 28 percent below last year’s pace, as high mortgage rates and low supply have slowed the market this year, even as home-price growth has decelerated in many markets across the country,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Refinance applications also increased last week but remained at half of last year’s levels. Although incoming data points to a slowdown in the U.S. economy, markets continue to expect that the Fed will raise short-term rates at its next meeting, which have pushed Treasury yields somewhat higher. As a result of the higher yields, mortgage rates increased for the second straight week to their highest level in over a month, with the 30-year fixed rate now at 6.55 percent.”

Small cities in the Midwest topped the list of the Wall Street Journal’s Emerging Housing Markets Index. These markets include many in Indiana, including Elkhart, Fort Wayne and Lafayette. With remote work becoming more of a permanent fixture in American life, it was probably only a matter of time before people started fleeing the expensive urban areas and moved to the much more affordable South and Midwest. “While it has become more expensive, it is still more affordable than a lot of other areas of the country,” said Brett Lueken, managing broker at Century 21 The Lueken Group in Lafayette.

Fears of an implosion in the commercial real estate space haven’t yet shown up in Blackstone Mortgage Trusts’s numbers. The mortgage REIT which focuses on CMBS reported an increase in book value per share and earnings which comfortably covered the dividend. The stock yields 14%.

Homebuilder Taylor Morrison reported an increase in first quarter earnings as gross margins improved. The cancellation rate fell to 14%, which is still elevated but approaching more normal levels.  “Following a strong early start to the year, positive sales momentum accelerated further into March, consistent with typical seasonal patterns despite the uncertainties facing the market. In total, during the quarter, our gross sales orders improved to a healthy monthly pace of 3.4 per community, the highest level since the third quarter of 2021, while our cancellation rate declined to more normalized levels at 14% of gross orders. This drove our monthly net sales pace to 2.9 per community as compared to 1.9 in the fourth quarter and 3.1 a year ago. This momentum has carried through the first three weeks of April, with our sales running at a pace of approximately 3.1 net orders per community. Meanwhile, leading indicators—including sales traffic, mortgage pre-qualifications and digital home reservations, which remained our top conversion source at a rate of 40% in the first quarter—point to continued strength.”

Luxury apartment landlord Equity Residential reported an increase in earnings per share. Same store rental increase came in at 3.9%, which is interesting given that Equity Residential has a lot of West Coast exposure (especially in expensive California urban MSAs) and real estate prices have been falling there.

7 Responses

  1. Of course, because as Mitch McConnell asserted, it’s the Republican’s number 1 priority.


  2. Thank God, we’re saved!


  3. Eric Tarrio/leader of the Proud Boys makes an interesting comment on his jail conditions:

    I find humor in everything, I think. I think it’s actually pretty funny because here in this state they have the Lockerbie bomber. I don’t know if you guys have heard that the Lockerbie bomber came into the custody of the United States back in December. And they have the Lockerbie bomber here, and he killed a whole bunch of people – he downed an entire plane – and they don’t have him on the security level that they have me. Okay? They literally have to clear the entire floor,. That could be visits with my family, by myself. Okay? There’s nobody. Nobody can be around me. I walk the halls, it looks like a ghost town with me and just one other deputy. And I’m in the highest level of security that anybody can be in in this jail. And that’s… that’s in every jail that I go to. And they have the Lockerbie bomber in here, and this guy’s in general population just hanging out. But, little ol’ me that has never assaulted anybody has never even threatened to assault anybody, they got me on like this super-max lockdown.

    An Arizona layer has a YouTube channel he reads the tweets that Raogrt Parlof/Lawfare puts out on the trial. It’s been absolutely fascinating.

    They’ll all be convicted of course.


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