Morning Report

Posted on January 24, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1304.6 -6.5 -0.50%
Eurostoxx Index 2410.3 -31.180 -1.28%
Oil (WTI) 99.26 -0.320 -0.32%
LIBOR 0.5591 -0.001 -0.18%
US Dollar Index (DXY) 79.989 0.191 0.24%
10 Year Govt Bond Yield 2.05% 0.00%

 

Stocks are lower on brinkmanship over the Greek settlement talks.  In spite of Greek worries, EURIBOR / OIS (a measure of stress in the  banking system that is watched closely by professionals) has been in steady decline for a month now.  It is currently 80 basis points lower than its post-crisis peak of 100 basis points in early December.

 

The Washington Post has an article on the potential robo-signing settlement with the large banks.  The size of the settlement is said to be around $25 billion and liberals want it larger.  It will supposedly include additional regulations on loan servicers, which could create loads of unintended consequences.  Mortgage Servicing Rights are already pretty much worthless, and the big banks are exiting the business.  Ocwen is refusing to advance principal and interest payments to bondholders until it recoups its advancements.  The administration could end up shooting itself in the foot if it goes overboard with the servicers.

 

Diamondback is settling with the SEC for $9 million.  Diamondback is a $2.5 billion hedge fund in Stamford CT and is run by ex SAC traders.  It will be interesting to see if the Feds get info that leads back to Stevie Cohen.

 

Japan is running a trade deficit?   Apparently, yes.  Part of it is due to the nuclear disaster and the earthquake, but it is also due to a strong currency and an aging population.  Japanese companies are succumbing to the same globalization forces we are and are moving production overseas.  The yen has been strengthening for 30 years, bottoming out at 277 in 1982.  It is now 77.

 

No major economic news today.  Apple will report after the close.

Filed under: Uncategorized | 149 Comments »

Morning Report

Posted on January 23, 2012 by Brent Nyitray
Vital Statistics:
Last Change Percent
S&P Futures 1311 0.2 0.02%
Eurostoxx Index 2442.2 15.200 0.63%
Oil (WTI) 98.97 0.640 0.65%
LIBOR 0.5601 -0.001 -0.18%
US Dollar Index (DXY) 79.746 -0.410 -0.51%
10 Year Govt Bond Yield 2.06% 0.04%
Congrats to the Pats and G-Men.
Markets are slightly higher this morning as Greek bondholders have made their best and final offer to the EU and IMF. Much of Asia was closed overnight in observance of the Lunar New Year.
Even Krugman is figuring out the economy is improving. He notes that housing has been a drag on the economy, but six years into the bust, it is becoming less and less of a drag as the excesses have been largely worked off. If housing becomes a positive, it could finally set the stage for the virtuous economic cycle we have been waiting for.
Of course Krugman takes shots at Obama for “giving into Republican demands that he slash spending” and at Bernake for giving in to Republican demands that it tighten money, positing that we wouldn’t be on the slow road to recovery if we had simply listened to him. He also goes on to slay the Bush dragon and the ECB dragon as well. The Fed tightened? Obama slashed spending? Whatever, Paul. I used to like Krugman when he was just an economist, now he is more of left wing Larry Kudlow.
Earnings Season continues this week with a ton of reports. The biggest names will be Apple, Boeing, and McDonalds, but there are a lot of industrials and energy names reporting as well. In economic data, we have the FOMC decision this week (will be interesting to see if the recent economic strength is noted in the statement). Durable Goods and Leading Economic indicators will be good data points this week.

Filed under: Earnings Announcements, Economic data, Uncategorized | Tagged: | 56 Comments »

Morning Report

Posted on January 20, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1308.1 -2.3 -0.18%
Eurostoxx Index 2427.4 -7.670 -0.31%
Oil (WTI) 99.96 -0.430 -0.43%
LIBOR 0.5611 0.000 -0.02%
US Dollar Index (DXY) 80.3 0.244 0.30%
10 Year Govt Bond Yield 1.99% 0.02%
Futures are down slightly this morning on weakness in Europe and a lackluster earnings report from GE and Google. GE’s Earnings were a penny better (surprise, surprise) but revenues came in light due to weakness in Europe and the finance business. Google stunk up the joint with a miss on the top line and the bottom line. It is down 8% pre-market.
Sorry I wasn’t around yesterday, though I see some people filled in for me.  I was at the CSFB Securitized Products conference yesterday in the city. Congressman David Schweikert (Vice Chairman of te House Financial Services Subcommittee on Capital Markets and Government Sponsored Enterprises) spoke regarding the regulatory environment. A few takeways from the conference:
1) CSFB expects housing to decline 5%-7% this year and that *should* mark the bottom.
2) The government wants to introduce private capital into the mortgage market, but at the same time is trying to drive it away. The SEC is looking at changing the treatment of mortgage REITs which would drain, not add, private capital.
3) To get Fannie Mae capitalized to a reasonable level that would allow it to re-float would take a quarter of a trillion dollars. Nobody has a clue where that much money can be raised in the private sector. Which means Fannie and Fred will continue to be wards of the state.
4) The government is really interested in REOs to rentals. The problem is scalability.
5) 60% of underwater homeowners are current on their mortgages. Any sort of mass refinancing / mass principal cramdown for delinquent borrowers will also contain a massive moral hazard problem. Also, different treatment – the homeowner with a FHA loan gets relief, while the guy who’s mortgage went the private label route gets nothing.
6) There are a few leaders in Washington who get it, but most don’t. The appetite is still for slowing the foreclosure pipeline (in spite of volumes of evidence that it doesn’t do a thing to slow price depreciation – in fact it makes it worse).
7) Democrats want mass principal cramdowns and refis in spite of the fact that it would be an economic drag. It is simply a 1:1 transfer of wealth from investors to borrowers, so there is no multiplier effect, and the additional regulatory risk would drive mortgage rates higher. CSFB has conducted studies showing it is the affordability of the mortgage payment that matters, not the borrower’s equity position.
8) Question of the day: “Congressman, has anyone in Washington thought about just letting the markets clear?”  (The only thing that brought out laughter from the audience all day)
One observation I would make is that we want first time homebuyers, not necessarily hedge funds, to be buying up the excess supply. Yet closing times and down payment requirements for short sales drive many first time homebuyers away. I don’t know if it is because of regulatory reasons. If it is, Washington and the states should figure out a way to streamline the process.
In economic data, existing home sales comes out at 10:00.

Filed under: Earnings Announcements, Economic data, Economy, free markets, housing, politics | 35 Comments »

Morning Report

Posted on January 18, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1292.7 3.4 0.26%
Eurostoxx Index 2397.8 1.190 0.05%
Oil (WTI) 101.93 1.220 1.21%
LIBOR 0.5612 -0.001 -0.20%
US Dollar Index (DXY) 80.634 -0.480 -0.59%
10 Year Govt Bond Yield 1.85% 0.00%
Futures are up slightly on earnings and a lack of market-moving news out of Europe. Bond geeks will note that EURIBOR / OIS (a measure of stress in the banking system) has been moving lower since the year began. It is at 84 basis points, having dropped from 101 basis points six weeks ago. ECB funding probably explains some of it, but it is a welcome sign and helps explain the more sanguine mood of Mr. Market recently.
Goldman reported better than expected results this morning based on cost cuts. Compensation fell 21% and staff decreased 7%. On cue, William Cohan was on Bloomberg TV this morning complaining that Wall Street comp is still 50% too high. US Bancorp also reported better than expected earnings.
The Producer Price Index came in a little hot, but still subdued. PPI ex food and energy was up .3% MOM and 3.0% YOY. Inflation is still a non-issue as far as the Fed is concerned. Tomorrow will be a big economic day with CPI, Housing Starts and Initial Jobless Claims. No report tomorrow as I will be in the city all day.
EDIT:  More bullish economic data:  Capacity Utilization increased again to 78.1% and the NAHB Homebuilder sentiment index increased to 25, confirming what the homebuilders have been saying on their conference calls.

Filed under: Earnings Announcements, Economic data, Economy, eurozone, Financial Crisis, Homebuilding, Morning Report, stock market, Wall Street | Tagged: | 49 Comments »

Morning Report

Posted on January 17, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1300.9 12 0.93%
Eurostoxx Index 2397 35.460 1.50%
Oil (WTI) 100.77 2.070 2.10%
LIBOR 0.5623 -0.003 -0.46%
US Dollar Index (DXY) 80.821 -0.658 -0.81%
10 Year Govt Bond Yield 1.90% 0.04%
S&P futures are up after a 3 day weekend that started with S&P downgrades in Europe. Markets seem to be taking comfort in the Chinese GDP report last night that came in stronger than expected. Meanwhile Greece continues talks with bondholders regarding its upcoming 3/20 interest payment.
Earnings season gets into full swing this week, with Citigroup and Wells Fargo reporting this morning. Citi missed earnings on a drop in trading revenue, while Wells beat on stronger mortgage lending operations. Citi is down about 3 percent pre-open, while Wells is up about a percent.
In economic data, Empire State Manufacturing came in strong at 13.48 vs 11 expected.

Filed under: Morning Report | Tagged: , , | 49 Comments »

Morning Report

Posted on January 13, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1288.4 -3.3 -0.26%
Eurostoxx Index 2364.3 18.430 0.79%
Oil (WTI) 99.48 0.380 0.38%
LIBOR 0.567 -0.005 -0.79%
US Dollar Index (DXY) 81.026 0.192 0.24%
10 Year Govt Bond Yield 1.90% -0.02%

Happy Friday the 13th.
It is a slow news day ahead of a 3-day weekend. S&P futures are down slighly, while Europe is up slightly. Sovereign yields are lower.
Import prices came in as expected, while the trade deficit increased. J.P. Morgan’s earnings were down 23%, but still in line with expectations. Tier 1 common equity and Tier 1 common ratio are well in excess of Basel III requirements. Jamie Dimon is speaking to the press right now, and is noting that regulatory uncertainty is hurting the mortgage market. He also takes a shot at the Durbin Amendment, calling it a “Gross Miscarriage of Justice.” Don’t put too fine a point on it, Jamie.
Earnings season gets into full swing next week, with most of the financials reporting, along with big names like Ebay, Johnny John, IBM, Intel, Softee, Google, and GE.
Edit: University of Michigan Consumer confidence came in at 74 up 6% MOM and more or less flat YOY.

Filed under: Uncategorized | 20 Comments »

Morning Report

Posted on January 12, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1294.5 6.3 0.49%
Eurostoxx Index 2371.5 31.960 1.37%
Oil (WTI) 101.97 1.100 1.09%
LIBOR 0.5715 -0.005 -0.87%
US Dollar Index (DXY) 81.118 -0.140 -0.17%
10 Year Govt Bond Yield 1.92% 0.01%

Markets are slightly positive this morning as good news out of Europe is offset by disappointing economic numbers out of the US. Spain and Italy had good debt auctions, which is pulling down sovereign yields across the board. The ECB held rates at 1% and noted “tentative signs of stabilization” in Europe.
Initial Jobless claims for the week ending 1/7 were 399k, versus 375k expected. Continuing claims were higher as well. Retail Sales for December were flat ex autos. November numbers were revised upwards. Given the comp numbers reported last week, I would not be surprised to see upward revisions. It feels like an outlier.
Regarding the jobs numbers, an interesting dynamic will be playing out in the unemployment numbers. Workers who have been unemployed for over 6 months are considered “discouraged workers” and do not count in the unemployment numbers. As the economy improves, those workers will start looking for work again and should be counted as “unemployed” This should add upward pressure to the unemployment numbers. But, with an election coming up, the Labor Department will want to understate this phenomenon as much as possible. So I would take any unemployment numbers with a grain of salt, if you don’t already.
The winter that never was (it is 40 degrees and rainy this morning in the Northeast) is wreaking havoc on natural gas prices. While WTI continues to hang around $100, gas is now down to $2.71. Natural gas bulls are being taken to the woodshed, and is approaching the 2009 lows of $2.51. It will be interesting to see if someone ends up getting carried out on a gas bet.

Filed under: Uncategorized | 7 Comments »

Morning Report

Posted on January 11, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1282.1 -4 -0.31%
Eurostoxx Index 2333.4 -14.120 -0.60%
Oil (WTI) 101.41 -0.830 -0.81%
LIBOR 0.5765 -0.003 -0.52%
US Dollar Index (DXY) 81.325 0.426 0.53%
10 Year Govt Bond Yield 1.94% -0.03%

Markets are a touch weaker this morning after yesterday’s rally. Euro sovereign yields are tighter on a lack of news. The Fed’s Beige Book comes out around 2:00 this afternoon and tomorrow we get jobless claims and retail sales data.
Bloomberg is speculating that the Fed is ready to start large-scale mortgage purchases again. I suspect the reason for this is the new increased fee that Fannie Mae is going to charge, which will probably tack on 10 basis points or so to the interest rate on new mortgages starting next month. The hope is that they can reduce the base yield of MBS in order to take the sting out of the increased fee.
Rumors of a big refi package coming from the GSEs will get more life as Fannie Mae’s CEO Michael Williams is stepping down. The rumor has been that the government will start offering no-questions-asked refis to anyone who is current on their mortgage. I have said before that the originator is the weak link in this plan, but there is an election coming up. Even if it doesn’t work, it allows obama to say he is doing something about house prices.
Lennar reported earnings in line with expectations this morning, but the focus is going to be on the outlook. They reported a 35% increase in backlog and a 20% increase in new orders – more indications that construction is coming back, albeit from a very depressed level. Historically, housing starts would be 1.5MM to 2MM units at this point in the economic cycle, not the current 650k annual pace. Their view is that the housing market is stabilizing.

Filed under: Uncategorized | 85 Comments »

Morning Report

Posted on January 10, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1289.5 13.9 1.09%
Eurostoxx Index 2351.9 65.460 2.86%
Oil (WTI) 103.13 1.820 1.80%
LIBOR 0.5795 -0.001 -0.17%
US Dollar Index (DXY) 80.776 -0.212 -0.26%
10 Year Govt Bond Yield 2.00% 0.04%

Markets are rallying worldwide on no real news. Alcoa kicked off earnings season last night with a loss that was more or less expected. Sales were higher than forecast. Alcoa also forecast global demand will drop to 7% from 11% last year on China weakness. Regardless, the stock is up this morning. Lennar and JP Morgan also report this week. I am interested in what Lennar has to say – construction has been the weak link in this recovery, and some of the other homebuilders had been relatively optimistic about 2012. If housing construction starts picking up, that is a great sign that the recovery is picking up steam.
The markets are rallying partly on hope that China will ease. China’s hard or soft landing may turn out to be the next wall of worry after Europe. By all accounts, their real estate bubble has burst and Chinese savers are heavily exposed to real estate. China’s capital controls mean that Western banks don’t have much exposure to China’s banks, but they do have exposure to the big UK/HK giants HSBC and Standard Chartered. At any rate, the loss of Chinese demand is the last thing the global economy needs at the moment, though it will be music to the Fed’s ears as it should lead to lower commodity prices.

Filed under: Uncategorized | 17 Comments »

Morning Report

Posted on January 9, 2012 by Brent Nyitray

Vital Statistics:

Last Change Percent
S&P Futures 1275.1 0.9 0.07%
Eurostoxx Index 2304.9 6.280 0.27%
Oil (WTI) 101.43 -0.130 -0.13%
LIBOR 0.5805 -0.001 -0.17%
US Dollar Index (DXY) 81.1 -0.160 -0.20%
10 Year Govt Bond Yield 1.98% 0.02%

Markets are flattish this morning on a lack of news. No major news out of Europe. Unicredito is the first Euro bank to start raising additional capital. The stock is down 12% on its rights issue.
Robert Samuelson has a column on the state of China’s real estate bubble. I don’t think people in the US fully grasp the size of that bubble. China has entire cities built on spec – in other words, they are completely built and vacant. Here are some satellite images. Apartments in Beijing are 27 times income. Chinese savers have few investment options, so real estate tends to absorb the majority of the excess capital. This could get ugly over the next few years. While the western banks don’t have a lot of direct exposure to Chinese banks, they do have exposure to HSBC and Standard Chartered. For those wanting a stronger Chinese currency, forget about it.
Earnings season kicks off tonight with Alcoa reporting after the close.

Filed under: Uncategorized | 16 Comments »

« Previous Page — Next Page »