Morning Report: Trump talks trade at noon today.

Vital Statistics:

 

Last Change
S&P futures 3087 -0.25
Oil (WTI) 57.09 -0.04
10 year government bond yield 1.94%
30 year fixed rate mortgage 4.02%

 

Stocks are flat this morning on no real news. Bonds and MBS are up small.

 

Donald Trump will speak at the Economics Club today around noon and markets will be listening for any sort of information on trade with China. This will probably be something that affects stocks more than bonds, but just be aware.

 

Small business optimism remained strong in October, according to the NFIB Small Business Optimism Index. Job creation, inventory investment and capital spending drove the increase. While we are seeing increases in labor compensation, prices paid are still flattish so we aren’t seeing inflation. “Labor shortages are impacting investment adversely – a new truck, or tractor, or crane is of no value if operators cannot be hired to operate them,” said NFIB Chief Economist William Dunkelberg. “The economy will likely remain steady at its current level of activity for the next 12 months as Congress will be focused on other matters, and an election cycle will limit action. Any significant change in trade issues will impact financial markets more than the real economy during this period. Adjustments to a new set of ‘prices,’ such as tariffs, will take time.”

 

Homebuilder D.R. Horton reported better than expected earnings this morning, sending the shares up 3% pre-open. Forward guidance for 2020 was also above expectations. The homebuilders have been on a tear this year, as interest rates have fallen. The homebuilder ETF (XHB) is up something like 50% YTD.

 

Mortgage credit availability increased in October, according to the MBA. “Mortgage credit availability increased in October, driven mainly by an increase in conventional loan programs, including more for borrowers with lower credit scores, as well as for investors and second home loans,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Credit supply for government mortgages continued to lag, declining for the sixth straight month. Meanwhile, the jumbo credit index increased 3 percent to another survey-high, as that segment of the market stays resilient despite signs of a slowing economy.”

 

CBS is out with a piece claiming that climate change will eliminate the 30 year fixed rate mortgage. The fear is that flood insurance could get too expensive and wildfires will make certain areas uninsurable / uninhabitable. How that translates into the end of the 30 year fixed rate mortgage is anyone’s guess, since the piece fails to show its work. FWIW, this article is just clickbait. The 30 year mortgage is going nowhere, and climate change isn’t going to destroy the financial system. The Union of Concerned Scientists frets about the “short sighted” market, but a typical mortgage lasts about 7-10 years, so something that might happen in 30-50 years is going to be off the radar, by definition.

Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s