Morning Report: S&P 500 enters correction territory

Vital Statistics:

 

Last Change
S&P futures 2648 4.5
Eurostoxx index 355.05 -0.48
Oil (WTI) 66.58 -0.46
10 year government bond yield 3.11%
30 year fixed rate mortgage 4.93%

 

Stocks are slightly higher this morning ahead of a big earnings day. Bonds and MBS are down small.

 

General Electric disappointed and cut its dividend to a nominal amount. Facebook reports after the close.

 

Stocks got kicked in the teeth again yesterday, with a 100 point intraday reversal in the S&P 500. Selling climaxed right around 3:30 before recovering some of the losses into the close. The S&P is officially in a correction, which is defined as a 10% retracement from the high. Tech was thrown overboard and investors are beginning to hide in consumer staples. Bonds largely ignored the action in stocks, with the 10 year stuck in a tight range right around 3.08%.

 

Personal Income rose 0.2% in September, which came in below consensus. Personal spending was strong at 0.4%, and the savings rate fell to the lowest level this year. Inflation remained tame however, with the PCE headline and core readings at 2.0%, spot on the Fed’s target. The December Fed Funds futures are beginning to up the probability that the Fed does nothing in its final meeting of the year. Between a global growth slowdown (Europe’s GDP numbers were terrible this morning), trade fears, and controlled inflation the Fed does have the leeway to take a wait and see approach in December.

 

savings rate

 

JP Morgan was secretly prevented from growing by the Obama administration as a penance for sins during the housing bubble. The Obama Administration wouldn’t let them open any new branches in new states in a penalty that went back to 2012. The fascinating part was that it wasn’t disclosed to the markets. Surely that info was relevant to stockholders. Was Dimon hiding info from the market? Or did the Obama Admin not want people to know he was imposing double-secret probation on certain banks? Regardless, the Trump OCC has reversed the decision and JP Morgan is now free to add branches subject to the 10% deposit cap.

 

Author: Brent Nyitray

Why do you need new bands? Everyone knows rock attained perfection in 1974. It's a scientific fact. - Homer Simpson

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