Morning Report: The manufacturing economy contracted again in March

Vital Statistics:

S&P futures4,130-9.50
Oil (WTI)80.204.54
10 year government bond yield 3.51%
30 year fixed rate mortgage 6.40%

Stocks are lower this morning after OPEC voted to restrict production over the weekend. Bonds and MBS are down.

The jobs report on Friday will be the big event for the week, along with the ISM data. The bond market will close early on Friday.

FHFA is making the COVID-era six month deferral permanent, allowing borrowers to skip up to six monthly payments and then tack them on to the end of the mortgage. “The Enterprises completed more than one million COVID-19 payment deferrals during the pandemic, helping borrowers nationwide to stay in their homes,” said FHFA Director Sandra L. Thompson. “Based on the success of the COVID-19 payment deferral, we are making this solution a key part of our standard loss mitigation toolkit that is available to all borrowers with eligible hardships.”

More evidence that the bank deposit run of a few weeks ago is abating. Raymond James points out that smaller banks are gaining deposits. Overall, deposits did fall, but they came out of the larger banks and the foreign-domiciled ones. “Essentially, the liquidity crisis, if it even was one outside a handful of banks, appears to be easing, which should be good news for banks and financials, which were the worst performing sector in Q1,” the strategist wrote. “It makes very little sense we would have a broad liquidity crisis in the banking system when there is so much excess liquidity (cash) sloshing around,” he said.

The manufacturing economy contracted in March, according to the ISM Manufacturing Survey.  “The U.S. manufacturing sector contracted again, with the Manufacturing PMI® declining compared to the previous month. With Business Survey Committee panelists reporting softening new order rates over the previous 10 months, the March composite index reading reflects companies continuing to slow outputs to better match demand for the first half of 2023 and prepare for growth in the late summer/early fall period. New order rates remain sluggish as panelists become more concerned about when manufacturing growth will resume. Supply chains are now ready for growth, as panelists’ comments support reduced lead times for their more important purchases. Price instability remains, but future demand is uncertain as companies continue to work down overdue deliveries and backlogs. Seventy percent of manufacturing gross domestic product (GDP) is contracting, down from 82 percent in February.”

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Author: Brent Nyitray

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

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