Morning Report: Welcome to 2020

Vital Statistics:

 

Last Change
S&P futures 3251 20.25
Oil (WTI) 61.07 0.04
10 year government bond yield 1.88%
30 year fixed rate mortgage 3.95%

 

Stocks are higher this morning after China eased reserve rates overnight. Bonds and MBS are flat.

 

Announced job cuts (in other words, press releases discussing layoffs) fell to 32,845 in December according to outplacement firm Challenger, Gray and Christmas. “Confidence was high heading into the last month of the year. With some resolutions occurring in the trade war and strong consumer spending in the fourth quarter, companies appear to be taking a wait-and-see approach as we head into 2020,” said Andrew Challenger, Vice President of Challenger, Gray & Christmas, Inc. “The sectors with the highest number of cuts this year were all dealing with trade concerns, emerging technologies, and shifts in consumer behavior. We tracked a lot of hiring activity in these industries as well as cuts,” said Challenger. Separately, initial jobless claims fell to 222k last week.

 

Mortgage Applications fell by 5% as purchases and refis fell by the same amount. “The 10-Year Treasury yield increased [the week ending December 20] amid signs of stronger home building activity and solid consumer spending, leading to a rise in conventional conforming and jumbo 30-year mortgage rates to just under 4 percent,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “With this increase, conventional refinance application volume fell 11 percent. Refinance applications for government loans did increase, even though rates on FHA loans picked up. The change in the mix of business has kept the average refinance loan size smaller than we had seen earlier this year.”

 

The Trump Administration is saying that a Phase 1 deal is done, and everyone is waiting on translation. “It’s got great stuff in it,” he [Trade Advisor Peter Navarro] said. “It’s got essentially the same chapter we had in the May deal that the Chinese walked away from on intellectual property theft. So that’s a good deal….For Wall Street … financial market access for the banks, insurance companies and credit card companies,” he added.

 

Happy new year, and here’s to a prosperous 2020, with housing starts above 1.5 million, originations over $2.2 trillion and a 30 year fixed rate mortgage below 3.5%. Hey, it could happen.

Morning Report: Goldilocks jobs report

Vital Statistics:

 

Last Change
S&P futures 2891 6.75
Eurostoxx index 387.8 -1
Oil (WTI) 62.72 0.26
10 year government bond yield 2.54%
30 year fixed rate mortgage 4.20%

 

Stocks are higher this morning after the payroll number. Bonds and MBS are down small.

 

Jobs report data dump:

 

  • Nonfarm payrolls up 196,000 (expectation 180,000)
  • Average hourly earnings up 0.1% MOM / 3.2% YOY (expectation 0.3% / 3.4%)
  • Labor force particpation rate 63%
  • Unemployment rate 3.8%

 

Overall, it was a bit of a Goldilocks jobs report: enough strength to quell fears of a slowdown, but tame enough wage growth to keep the Fed from tightening more. January and February’s payroll numbers were revised upward by 14,000.

 

Trump will nominate Herman Cain for the Federal Reserve Board. While many find the idea of nominating a pizza chain executive strange, he did run the Kansas City Fed so he does have monetary policy experience. Certainly with Steve Moore and Herman Cain, there will be a different voice from the predominantly academic / salt water view on things.

 

The Senate confirmed Mark Calabria to run FHFA.