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Daily Market Analysis July 31, 2020

July 31st, 2020 9:12 AM by Richard Sardella MLO.100007700/NMLS 233568

Daily Market Analysis

After the markets closed yesterday, the big tech companies (Apple, Facebook, Amazon, and Google) all reported Q2 earn earnings and posted stronger than expected. This morning in pre-open trading, the NASDAQ made another new all-time high, up 105 points while the DJIA and S&P were trading only quietly better. MBS markets opened this morning, generally unchanged.

At 8:30 am ET, June personal income and spending were magically in line with estimates; income -1.1% as expected, spending +5.6% as expected. The June PCE (personal consumption expenditures) also right on estimates, +0.4%, yr./yr. +0.8%; the core PCE expected at +0.5% was right on, yr./yr. core +0.9%. While not important to the big picture, the consensus forecasts are rarely right on the actual data.

Q2 employment cost index was expected +0.6%, reported +0.5%; yr./yr. +2.7%, down from +2.8% in Q1.

At 9:30 am ET, the DJIA opened +46, NASDAQ +146, S&P +16. 10 yr. at 9:30 am, 0.55% after declining to 0.52% at 12:00 am this morning. FNMA 2.5 30 yr. coupon at 9:30 -2 bps from yesterday’s close and -2 bps from 9:30 am yesterday.

At 9:45 am, the July Chicago purchasing mgrs. index was estimated at 42.8 from 36.6 in June; the index as released leaped to 51.9 and now back into expansion (above 50). The index the best since May 2019 and well above May’s 32.3 read. On release, the 10 yr. note increased 1 bps to 0.56%; MBS prices didn’t move.

At 10:00 am ET, the final July U. of Michigan consumer sentiment index expected unchanged from mid-month at 73.2, the index slipped to 72.5; June sentiment was 78.1.

The Senate Republicans can’t agree on the next stimulus after four days of debate. Democrats two months ago passed a plan to spend $3.5 trillion while Republicans have fixated on just $1 trillion of additional spending. The elephant is increased unemployment compensation for unemployed, Dems want $600.00/week while Republicans are looking for $1200.00/month. The Democrat bill is loaded for assistance for almost everything, while Republicans are concerned about more spending and the impact on the exploding federal debt. Republicans can’t agree among themselves with the election coming quickly and senators looking at their re-election issues. Republicans are looking for a temporary extension when the present additional unemployment payments are set to expire tomorrow, House Speaker Nancy Pelosi and Senate Democratic leader Chuck Schumer rejected that idea. Republicans, including President Trump, are pressuring Democrats to go along with a stopgap extension of the expanded unemployment benefit and a moratorium on evictions while talks continue on a more comprehensive virus relief bill. Those two measures were part of the March stimulus package and are now expired, leaving millions of Americans without that safety net. The Senate is scheduled to begin its August break at the end of next week. House Majority Leader Steny Hoyer said the chamber won’t be in session next week, but members will be subject to recall on 24 hours’ notice if a deal is reached and ready for a vote.

The 10 yr. holding but has given back the gains overnight when it dropped to 0.52%. Still expect the note to continue to decline to 0.50%, then 0.45%.

PRICES @ 10:00 AM ET

10 yr. note: 0.56% +1 bp

5 yr. note: 0.24% +1 bp

2 Yr. note: 0.12% unch

30 yr. bond: 1.23% +2 bp

Libor Rates: 1 mo. 0.155%; 3 mo. 0.251%; 6 mo. 0.314%; 1 yr. 0.456% (7/30/20)

30 yr. FNMA 2.5: @9:30 104.97 -2 bp (-2 bp from 9:30 yesterday)

30 yr. GNMA 2.5: @9:30 105.23 -16 bp (-22 bp from 9:30 yesterday)

Dollar/Yuan: $6.9761 -$0.0327

Dollar/Yen: 105.73 +1.00 yen

Dollar/Euro: $1.1821 -$0.0027

Dollar Index: 93.10 +0.08

Gold: $1983.80 +41.50

Crude Oil: $40.28 +$0.36

DJIA: 26,217 -96

NASDAQ: 10,630 +42 (opened +146)

S&P 500: 3242 -5

About Richard Sardella

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.

About This Report And Disclosure Information

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.

Posted in:General
Posted by Richard Sardella MLO.100007700/NMLS 233568 on July 31st, 2020 9:12 AM

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