Morning Report: Goldman sees a break in the clouds

Vital Statistics:

 

Last Change
S&P futures 3109 5.25
Oil (WTI) 58.39 0.24
10 year government bond yield 1.76%
30 year fixed rate mortgage 3.93%

 

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

 

Existing home sales rose 1.9% in October, better than expected. Lawrence Yun, NAR’s chief economist, said this sales increase is encouraging and he expects added growth in the coming months. “Historically-low interest rates, continuing job expansion, higher weekly earnings and low mortgage rates are undoubtedly contributing to these higher numbers,” said Yun. “We will likely continue to see sales climb as long as potential buyers are presented with an adequate supply of inventory.” The recent increase in building permits is seen as a positive sign for the sector. Inventory remains tight, however at only a 3.9 month supply. Note that D.R. Horton just reported a 9% increase in units sold, so we are seeing more supply come on to the market.

 

The index of leading economic indictators fell 0.1% in October, driven by weakness in manufacturing. This points to slowing growth ahead.

 

Despite the LEI numbers, Goldman is predicting a “break in the clouds” for the economy going forward. They anticipate a 30 basis point pickup in global growth next year to 3.4%, and for the US economy to grow at a 2.3% pace. “We expect the global growth slowdown that began in early 2018 to end soon, in response to easier financial conditions and an end to the trade escalation,” the forecast said. “Although much could still go wrong, the news on trade policy – both US-China and issues related to Brexit – has gotten better in recent weeks.” They anticipate the 10 year bond yield will rebound to 2.25%.