Morning Report: The Weekly Tearsheet launches

Vital Statistics:

S&P futures3,93417.75
Oil (WTI)75.892.18
10 year government bond yield 3.758%
30 year fixed rate mortgage 6.37%

Stocks are higher this morning on follow-through from the jobs report on Friday. Bonds and MBS are up.

The week ahead will have some important economic data with the consumer price index on Thursday and the University of Michigan Consumer Sentiment survey on Friday. The Michigan number will focus on inflation expectations, which is something the Fed is laser-focused on. Jerome Powell will speak on Tuesday.

Earnings season kicks off this week with the big banks reporting. The Street is looking for weak numbers and a string of layoffs. Goldman will be laying off about 3,200 employees this week, and we have seen plenty of layoffs in tech-land. The Fed wants to see a weaker labor market, so they might get what they are looking for.

Rate lock volumes declined 19.4% in December, according to Black Knight’s Mortgage Monitor. Purchase locks were down 20.5%, while rate / term were down 11.2% and cash-outs were down 14%. “Mortgage rates declined through the first half of December but reversed course as the Fed doubled down on their stance of additional tightening in 2023,” said Kevin McMahon, president of Optimal Blue, a division of Black Knight. “The spread between mortgage rates and the 10-year Treasury yield narrowed another 22 basis points during the month to 264 basis points, which is 40 basis points off the recent high, but is still up 81 basis points for the year.”

“Using Black Knight’s McDash mortgage performance data to provide comparative history, December saw the fewest purchase locks in a single month since early 2014, and the fewest overall rate locks on record dating back to January 2000 when Black Knight began reporting origination metrics,” McMahon continued. “The number of mortgage holders locking in a rate to refinance their existing mortgage also set a new record low for the fourth consecutive month.”

Given the absence of refi activity, seasonality is a big driver these days. We will probably continue to report lousy volumes until the Spring Selling Season starts in a month or so.

Another positive for inflation. Ocean shipping rates are down 80% from their peak in September. It may not have a massive effect of prices for consumers, but it certainly helps.

Finally, some news from me. I launched my Substack over the weekend, where I took went over the market’s reaction to the jobs report and the main drivers. The Weekly Tearsheet will take a deeper dive into some of the happenings in the prior week, along with economic commentary. I hope you enjoy it and consider subscribing. If you use this professionally and can expense it, I hope you consider becoming a paid subscriber.

I am accepting ads for this blog as well, if you would like a mention. In addition, if you enjoy the content and would like a white label solution for your company, I would be interested in having a conversation.


Author: Brent Nyitray

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

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