Morning Report: Housing starts jump

Vital Statistics:

 

Last Change
S&P futures 3376 6.25
Oil (WTI) 52.86 0.95
10 year government bond yield 1.58%
30 year fixed rate mortgage 3.69%

 

Stocks are higher this morning on no real news. Bonds and MBS are down.

 

Mortgage applications fell 6.4% last week as purchases fell 3% and refinances fell 8%.

 

Housing starts rose 21% on a YOY basis to 1.57 million, according to the Census Bureau. Building Permits were up 18% YOY to 1.55 million. Housing may turn out to be the economic surprise of 2020, and if that is the case, GDP estimates are way too low. Check out the chart below, and note the highlighted jump in starts over the past two months. Remember we are just going to back to historical averages, which doesn’t take into account population growth.

 

housing starts

 

Speaking of homebuilding, the NAHB Housing Market Index slipped from record levels but is still historically very strong. Separately, Tri Pointe reported that orders grew 52%. Interestingly, they hiked their stock buyback. If the housing market is really that strong, why not invest in the business as opposed to buying back stock?

 

Producer prices rebounded in January after a soft December. The headline number rose 0.5% MOM versus expectations of 0.1%. On a YOY basis, inflation remains close to the Fed’s target rate.

 

The minutes from the January FOMC meeting will be released at 2:00 pm EST. They shouldn’t be market-moving, and the interest seems to be on the balance sheet side of things.

 

Lots of merger activity in the financial space. Asset manager Franklin Resources is buying Baltimore stalwart Legg Mason.

 

Lending Club, a fintech that makes personal loans, just bought a bank in order to gain access to a cheaper source of funds. “What a bank charter does for LendingClub is it allows us to take what is the leading digital loan provider online and combine it with a leading digital deposit gatherer,” Scott Sanborn, CEO of LendingClub, said Tuesday on CNBC. “It totally changes the earnings profile of this business.”

 

Speaking of mergers, Ally is buying CardWorks in a $2.65 billion deal. The street doesn’t like it as the stock is down 10% pre-open.

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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