Morning Report: Q1 GDP Now estimate below 1%

Vital Statistics:

	Last	Change
S&P futures	4,408	0.2
Oil (WTI)	92.42	-0.63
10 year government bond yield		1.99%
30 year fixed rate mortgage		4.10%

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

The upcoming week will have some housing data including housing starts and the NAHB Housing Market Index. We will also get the Producer Price Index tomorrow. We will also have some Fed-Speak in the latter part of the week.

Mortgage delinquencies decreased in the fourth quarter, according to the MBA. “Mortgage delinquencies descended in the final three months of 2021, reaching levels at or below MBA’s survey averages dating back to 1979,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “The fourth-quarter delinquency rate of 4.65 percent was 67 basis points lower than MBA’s survey average of 5.32 percent. Furthermore, the seriously delinquent rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.83 percent in the fourth quarter, close to the long-term average of 2.80 percent.”  

St. Louis Fed Head James Bullard thinks the Fed needs to “front-load” the rate hikes. “I do think we need to front-load more of our planned removal of accommodation than we would have previously. We’ve been surprised to the upside on inflation. This is a lot of inflation,” Bullard told CNBC’s Steve Liesman during a live “Squawk Box” interview. Our credibility is on the line here and we do have to react to the data,” he added. “However, I do think we can do it in a way that’s organized and not disruptive to markets.”

The current estimate for Q1 GDP from the Atlanta Fed is below 1%. The Atlanta Fed’s GDP Now has Q1 GDP coming in at 0.7%. This means the economy is weak and probably won’t react well to rate hikes. The Fed has a fine line to walk here as it doesn’t want to push the economy into a recession. The Fed has to be hoping beyond hope that the current spate of inflation is supply-chain driven and works itself out.