Morning Report: Job openings exceed unemployed by over 1 million

Vital Statistics:

 

Last Change
S&P futures 2751.25 6.5
Eurostoxx index 364.16 1.38
Oil (WTI) 53.66 0.58
10 year government bond yield 2.69%
30 year fixed rate mortgage 4.43%

 

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

 

It looks like a shutdown may be avoided, as Congress has come up with a plan to allocate some funds to a smaller, cheaper border wall than Trump was looking for. The President hasn’t committed to signing anything yet, but it looks like he will go along.

 

The labor market continues to be on fire, as the number of job openings hit 7.3 million, a series record. The number of job openings exceeds the number of unemployed by over 1 million. Construction led the increase with a jump of 88,000, some of which is probably seasonal. The quits rate was unchanged at 2.3%, although it increased for the private sector while decreasing for government. The quits rate is a leading indicator for wage growth.

 

quits rate

 

Mortgage Applications fell 3.7% last week as purchases fell 6% and refis fell .01%.

 

Ellie Mae is being taken private in a $3.7 billion transaction. Private Equity firm Thomas Bravo will pay $99 a share for the stock, and has allowed a 35 day “go-shop” provision, which permits Ellie Mae to seek higher bids.

 

Small business optimism is returning to normal levels after spiking to all time highs in 2017 and 2018 according to the National Federation of Independent Businesses. Uncertainty in Washington, exacerbated by the lengthy government shutdown is making small business worried about the future. That said, they continue to hire, though they are more cautious about expansion plans.

 

 

 

 

Morning Report: Congressional Democrats take aim at BB&T / Suntrust merger

Vital statistics:

 

Last Change
S&P futures 2714 -8
Eurostoxx index 360.39 2.36
Oil (WTI) 52.28 -0.41
10 year government bond yield 2.64%
30 year fixed rate mortgage 4.43%

 

Stocks are down this morning on overseas weakness. Bonds and MBS are up small.

 

There is a possibility we could see another government shutdown at the end of the week. Talks over the weekend concerning border security funding went nowhere. For the financial industry, it will make funding loans for government employees more difficult, but everything else should be transparent.

 

Consumer staples companies are raising prices as commodity prices, transportation and labor costs increase. “The good news is that competitors are raising [prices] in those categories as we speak,” Church & Dwight Chief Executive Matthew Farrell said on a conference call last week when the company reported higher quarterly sales and lower profits. The Fed has been anxious to create more inflation, and it looks like they have finally succeeded. Does this mean we are headed for a repeat of 1970s inflation? Probably not – at least not in the near future. But it does mean the Fed Funds futures might be a touch too sanguine about monetary policy in 2019.

 

Speaking of inflation, we will get the consumer price index and the producer price index this week, which should be the only market-moving data.

 

Maxine Waters thinks the STI / BBT merger requires “serious scrutiny” “This proposed merger between SunTrust and BB&T is a direct consequence of the deregulatory agenda that Trump and Congressional Republicans have advanced,” Waters said in a statement to American Banker. “The proposed merger raises many questions and deserves serious scrutiny from banking regulators, Congress and the public to determine its impact and whether it would create a public benefit for consumers.” IIRC, all the “deregulaton” did was raise the ceiling for stress tests to $250 billion in assets. And that was due to the fact that many small banks were spending a lot on compliance and risk management for a portfolio of traditional bank loans. While it is entirely possible that someone at East Podunk Savings and Loan may blow himself up selling protection on a basket of CDO squareds, it is highly unlikely as well. And imposing all sorts of regulatory burdens on these banks under the guise of tackling systemic risk was on the wrong side of the cost / benefit ledger.