Morning Report: Sentiment improves overnight.

Vital Statistics:

 LastChange
S&P futures3,74757.75
Oil (WTI)85.351.72
10 year government bond yield 3.60%
30 year fixed rate mortgage 6.64%

Stocks are higher this morning as investors begin to anticipate the end of central bank tightening. Bonds and MBS are up.

Despite the rhetoric from central banks, investors are beginning to anticipate a pivot. Australia’s central bank surprised markets last night with a smaller-than-expected increase in its interest rate. No idea if this is another false dawn, but after a bloody end to Q3, any respite is welcome.

Job openings declined in August according to the JOLTs report. The quits rate was flat at 2.7%. This report is further evidence that the labor market is softening, however it doesn’t indicate weakness or anything like that. The labor market is still quite strong by historical standards.

Home prices dropped 0.98% in August, according to the Black Knight Mortgage Monitor. This is higher than the 0.6% decrease that showed up in the FHFA House Price Index.

“The Black Knight HPI for August marked the second consecutive month that prices pulled back at the national level, with the median home price now 2% off of its June peak,” said Graboske. “Only marginally better than July’s revised 1.05% monthly decline, home prices were down an additional 0.98% in August. Either one of them would have been the largest single-month price decline since January 2009 – together they represent two straight months of significant pullbacks after more than two years of record-breaking growth. The only months with materially higher single-month price declines than we’ve seen in July and August were in the winter of 2008, following the Lehman Brothers bankruptcy and subsequent financial crisis.

Again, for those thinking we are in for a replay of 2006-2008, we aren’t. We don’t have the financial stress that would create the forced selling that characterized the end of the bubble years. I would add, some decline in home prices is expected as part of normal seasonal variation.

The Atlanta Fed’s GDP Now Index now sees Q3 GDP coming in at a positive 2.3%. The personal incomes and outlays report from last week drove the increase.

Author: Brent Nyitray

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

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