Morning Report: Construction hiring surges

Vital Statistics:

 

Last Change
S&P futures 3140 3.1
Oil (WTI) 40.54 -0.21
10 year government bond yield 0.66%
30 year fixed rate mortgage 3.12%

 

Stocks are flattish this morning on no real news. Bonds and MBS are flat as well.

 

The “reopening trade” which lifted shares of banks, airlines, and leisure / hospitality companies has faltered a little on fears of a COVID resurgence. This has been pushing bond yields lower. The bank sector continues to struggle.

 

The MBA reported that the number of loans in forbearance decreased by 8 basis points to 8.39% as of June 28. “We learned last week that the job market improved more than expected in June,” said MBA Chief Economist Mike Fratantoni. “With that as background, it is not surprising that the forbearance numbers continue to improve as more people go back to their jobs. The improvement in the forbearance data was broad-based, with declines for both GSE and Ginnie Mae loans. The decrease in new forbearance requests indicates that further declines are likely in the weeks ahead.”

 

Mortgage applications increased 2.2% last week as purchases increased 5% and refis rose 0.4%. Note the week had an adjustment for the July 4 holiday. “Mortgage rates declined to another record low as renewed fears of a coronavirus resurgence offset the impacts from a week of mostly positive economic data, such as June factory orders and payroll employment,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Borrowers acted in response to these lower rates, after accounting for the July 4th holiday. Purchase applications continued their recovery, increasing 5 percent to the highest level in almost a month and 33 percent from a year ago. The average purchase loan size increased to $365,700 – also another high – as borrowers contend with limited supply and higher home prices.”

 

Job openings increased to 5.4 million in May, according to the JOLTS job report. Hires rose to 6.5 million, a series high. Construction hiring saw a huge jump with 673k new hires, although leisure and hospitality was the biggest jump with over a 1.3 million.

 

Quicken filed its IPO paperwork under the name Rocket Companies. The company originated $51.7 billion in loans in the first quarter of 2020. As you would expect, there are 4 classes of stock, and Dan Gilbert will hold the ones with 10 votes per share (the other class has 1 vote per share). For all intents and purposes, the new shareholders will have zero say in how the company is run. One number jumped out at me: Rocket is valuing its servicing at 2.2x, which is a pretty conservative number.

 

 

Author: Brent Nyitray

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

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