Vital Statistics:
| Last | Change | |
| S&P futures | 4,358 | 7.2 |
| Oil (WTI) | 80.82 | 0.29 |
| 10 year government bond yield | 1.60% | |
| 30 year fixed rate mortgage | 3.20% |
Stocks are higher this morning on no real news. Bonds and MBS are up small.
The number of job openings slipped in August to 10.4 million from a record in July. Trade / Transportation and Leisure / Hospitality are the big leaders in job openings. The quits rate, which tends to lead wage increases, rose 20 basis points to 2.9%. Check out the quits rate in some other industries: 4.7% in retail, 6.4% in leisure / hospitality, 6.8% in accommodation and food services.
I mentioned yesterday that Goldman Sachs sees US GDP coming in around 2% in the second half of 2021. This is a gutsy call given the consensus is for strong growth next year. Their call is for the supply chain issues to work themselves out and for inflation to return to its 2% level. They see no rate hikes in 2022 as inflation will be on the way down and growth will be too anemic to justify it.
As it stands right now, the December 22 Fed Funds futures see an 85% chance of a rate hike next year.
Note that we are seeing European confidence indices fall and we are on the cusp of third quarter earnings season. The banks will begin announcing numbers tomorrow, and investors are relatively sanguine about the financials. It is tech and industrial stocks that are the concern as rising input costs will reduce profits.
Small business optimism slipped in in September, according to the NFIB. “Small business owners are doing their best to meet the needs of customers, but are unable to hire workers or receive the needed supplies and inventories,” said NFIB Chief Economist Bill Dunkelberg. “The outlook for economic policy is not encouraging to owners, as lawmakers shift to talks about tax increases and additional regulations.”
A net 30% of companies intend to raise compensation in the next 6 months, which is a record for the survey, which goes back to almost 50 years. Interestingly capital expenditures remain low, as uncertainty regarding everything inhibits risk-taking. I think at some point businesses will start investing in labor-saving technology as it will help reduce costs and make it easier to fill orders.
The share of loans in forbearance fell to 2.68% last week, according to the MBA. This was a drop of 27 basis points, which is the fastest so far. “Many borrowers reached the expiration of their forbearance term as we entered October,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Payment performance has remained steady for those who have exited forbearance and into a workout since 2020, with more than 85% of those borrowers current as of October. It also continues to be striking that so many homeowners in forbearance have continued to make their payments. Almost 16 percent of borrowers in forbearance as of October 3rd were current.”
The Daily Tearsheet 