Morning Report: Fed decision day

Vital Statistics:

 

Last Change
S&P futures 2851 -1.25
Eurostoxx index 382.92 2.82
Oil (WTI) 58.48 0.39
10 year government bond yield 2.60%
30 year fixed rate mortgage 4.27%

 

Stocks are higher this morning as we begin the FOMC meeting. Bonds and MBS are flat.

 

The FOMC decision is set to be announced at 2:00 pm EST. Be careful locking around that time. They aren’t going to raise interest rates, but the focus will be on the dot plot and their interest rate forecast for 2019. There will also be interest in the size of the balance sheet, but it won’t be market moving.

 

The stock market has been rallying on hopes that the Fed will be taking 2019 off. Note that FedEx reported disappointing numbers, which is a canary in the coal mine for the global economy. The stock and bond markets have been sending different signals about the economy, with the stock market rising (signalling strength) and interest rates falling (signalling weakness). Part of this has been due to global growth concerns – especially in Europe and China. Global weakness doesn’t necessarily translate into a recession for the US, but it is a reach to think it won’t affect us at all.

 

Mortgage Applications rose 1.6% last week as purchases rose 0.3% and refis increased 4%. Mortgage rates drifted lower and are at the cheapest in a year.

 

The NAHB / Wells Fargo Housing Market Index was flat at 62 as we kick off the Spring Selling Season. Sales ticked up, but traffic is way down. Overall, the new home sales market is similar to where we left off in fall. We will get a read on existing home sales this Friday. We are seeing some evidence of cooling in housing markets, especially in the Northeast. According to the Redfin competitive numbers, places like Greenwich CT are at 9 on a scale of 1 – 100. Even erstwhile hot markets like San Diego have been cooling. The heat is in the laggard markets, with places like Harrisburg PA and Indianapolis doing very well.

 

greenwich

Indianapolis

 

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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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