July 30th, 2020 5:48 PM by Richard Sardella MLO.100007700/NMLS 233568
Before 8:30 am ET this morning, the stock indexes were lower (DJIA -200), the 10 yr. note 0.55% -2 bps, MBS prices +6 bps from yesterday’s close.
At 8:30 am ET, weekly jobless claims were expected at 1.388 mil, as reported 1.434 mil +12K from the previous week and the second week in a row that claims have increased from the highs in May. Claims were revised higher from the prior week from 1.416 mil to 1.422 mil. The increase in claims suggests that the employment outlook is worsening with the virus rebounding over the last month. Continuing claims increased 867K from the prior week, adding more concerns. Congress is trying to pass legislation to keep the additional $600.00/week unemployment pay. Congress is presently a mile apart on what will occur between Dems and Republicans deliberating on the $600.00/week offered up by Democrats and $1200.00/month by the GOP. Republican senators are divided between themselves, something we haven’t seen in months.
At 8:30 am ET, the advance look at Q2 GDP, expected -35 growth, as released -32.9% with consumption -34.6%. Not a shock, markets were expecting the decline. It is the advance report, next month the preliminary numbers that usually end up being the final when it is reported two months from now. The advance data always revised when the preliminary is released, the third month of the quarter doesn’t have all of the data. The Commerce Department said on Thursday gross domestic product increased 2.2% last year, revised down from the previously estimated 2.3% and also reflective of consumer spending that had begun to show signs of fatigue heading into 2020. The 2019 growth rate was the slowest expansion since 2016.
The Fed reiterated its commitment to do whatever it may take to do its part to support the economy. Yesterday, Powell said the Fed would continue to buy treasuries, MBSs, and corporate bonds.
The big boys will report today after the markets close; Apple, Amazon, Alphabet, and Facebook. Yesterday they were brow-beaten in the House with most legislators criticizing their power and size, suggesting the companies should possibly be broken up.
At 9:30 am ET, the DJIA opened -300, NASDAQ -79, S&P -32. 10 yr. at 9:30 am .55% -3 bps and below 0.57%, the key resistance level. MBS FNMA 2.5 30 yr. coupon +9 bps from yesterday’s close and +10 bps from 9:30 am yesterday. Lenders still pricing to the 2.5 coupon but likely to look more at the 2.0 coupon as mortgage rates edge lower; the 2.0 coupon at 9:30 am +14 bps from yesterday’s close.
The recent two-month rally in stocks may have hit the wall, at least for the time being as the economy slows with increased virus infections, not so much due to the weak Q2 GDP this morning, that was expected, but more caused by the weakening outlook for growth levels that were expected to increase in Q3 and Q4. Presently that forecast looks to be being questioned; growth forecasts have been coming in lower from sources like the IMF, the World Bank, and central banks. After an unsurprisingly gloomy economic assessment from Federal Reserve Chairman Jerome Powell on Wednesday, some are pondering whether markets would take cheer from data that may secure more stimulus down the road. So far, that theory is not panning out, as the data is out and stocks are sinking. And the election is just 98 days away with Trump still losing in the polls; a Democrat sweep is on the table for the moment, that isn’t encouraging for equity markets.
The 10 yr. at 0.55% is below 0.57% that we have continually discussed as a key technical level. We want to see a close below 0.57%, the more, the better in terms of expecting the 10 yr. to fall to 0.50% the next resistance level. Meanwhile, MBS markets have been strong the past week, investors looking toward MBS markets as a safe haven in this uncertain time.
PRICES @ 10:00 AM ET
10 yr. note: 0.55% -2 bp
5 yr. note: 0.23% -1 bp
2 Yr. note: 0.13% -1 bp
30 yr. bond: 1.20% -4 bp
Libor Rates: 1 mo. 0.161%; 3 mo. 0.260%; 6 mo. 0.315%; 1 yr. 0.461% (729/20)
30 yr. FNMA 2.5: @9:30 104.97 +8 bp (+9 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 105.22 +6 bp (+4 bp from 9:30 yesterday)
Dollar/Yuan: $7.0028 +$0.0010
Dollar/Yen: 105.08 +0.16 yen
Dollar/Euro: $1.1789 unch
Dollar Index: 93.26 -0.19
Gold: $1952.40 -$2.00
Crude Oil: $40.22 -$1.05
DJIA: 26,039 -500
NASDAQ: 10,443 -100
S&P 500: 3211 -48
Richard Sardella has been actively managing and providing services in the mortgage industry for over 27 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.