Morning Report: Fed Day

Vital Statistics:

 

Last Change
S&P futures 3210 4.1
Oil (WTI) 38.34 -0.39
10 year government bond yield 0.80%
30 year fixed rate mortgage 3.32%

 

Stocks are flattish as we await the FOMC decision. Bonds and MBS are up small.

 

The FOMC decision is set for 2:00 pm EST. No changes in policy are expected, and the main item will be the economic forecasts.

 

Small business optimism improved in May, according to the NFIB. “As states begin to reopen, small businesses continue to navigate the economic landscape rocked by COVID-19 and new government policies,” said NFIB’s Chief Economist Bill Dunkelberg. “It’s still uncertain when consumers will feel comfortable returning to small businesses and begin spending again, but owners are taking the necessary precautions to reopen safely.” Needless to say, profits and employment were depressed in May, and few businesses are looking at expansion right now.

 

Job openings fell to 5 million at the end of April according to the JOLTs jobs report. The quits rate fell to 1.4%.

 

Inflation decreased slightly in May, with the headline and core CPI indices down 0.1%. Ex-food and energy the CPI is up about 1.1% YOY. This is below the Fed’s target rate, so they will be in no hurry to raise rates.

 

Mortgage Applications increased 9.3% last week as purchases rose 5% and refis rose 11%. “Fueled again by low mortgage rates, pent-up demand from earlier this spring and states reopening across the country, purchase mortgage applications and refinances both increased,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “The recovery in the purchase market continues to gain steam, with the seasonally adjusted index rising to its highest level since January. Purchase activity increased for the eighth straight week and was a notable 13 percent higher than a year ago. Refinances moved higher for the first time in nearly two months, with both conventional and government applications rising and the overall index coming in 80 percent above year-ago levels.”

 

 

Author: Brent Nyitray

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

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