Morning Report: Bank earnings come in

Vital Statistics:

 

Last Change
S&P futures 2915 6.25
Eurostoxx index 388.92 0.82
Oil (WTI) 63.31 -0.09
10 year government bond yield 2.57%
30 year fixed rate mortgage 4.23%

 

Stocks are higher as bank earnings come in. Bonds and MBS are down.

 

Earnings season has begun, and the banks are all reporting.

 

Wells Fargo reported earnings that disappointed, although there was a bright spot on the mortgage origination side, where margins increased from 89 basis points to 105 basis points on “improving secondary market conditions.” That said, the bank expects Q2 margins to retrace a bit of that improvement. Originations were down 23% YOY to $33 billion, and correspondent as a percentage dropped from 63% to 55%.

 

JP Morgan reported that mortgage originations fell 18% in the first quarter compared to a year ago. The numbers were better than expected.

 

Bank of America reported better-than-expected earnings as well, and they saw a big jump in mortgage origination: $11.5 billion of first lien mortgages in the first quarter compared to $9.4 billion a year ago. In their credit card business, charge-offs are increasing a bit, which could be a warnings sign about the overall economy.

 

The Empire State Manufacturing Survey reported that business conditions improved modestly, however things are still “fairly subdued.” Optimism is waning, however firms continue to add workers. Inflation is declining as both prices paid and prices received fell.

 

Charles Evans suggested that the Fed could maintain the current level of interest rates into “late 2020.” Goldman Sachs is echoing the same sentiment. As a general rule, the Fed tries to not make any moves heading into an election for fear of appearing that they support one candidate or the other.

 

The Fed funds futures market is becoming a touch more hawkish, with the futures implying a 61% probability of no further moves this year and a 39% chance of a rate cut.

 

fed funds futures

 

After waiting for better times, home sellers in Greenwich are throwing in the towel. Many sellers are fed up with selling the old-fashioned way and are auctioning off properties. How bad are things? The median home price in Greenwich fell by 17% in the fourth quarter. The luxury end was even worse, falling 19% and it appears that it is down 25% in the first quarter. After a long, long wait the market is finally beginning to clear.

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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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