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Daily Market Analysis May 14, 2019

May 14th, 2019 9:33 AM by Richard Sardella MLO.100007700/NMLS 233568

Daily Market Analysis

Long term trade war with China? Not one knows, but at the moment it is unsettling equity markets. While it's not necessary to re-cap yesterday, everyone knows what happened in the US stock market. This morning, in early activity in the futures markets, the stock indexes are holding very minor improvements. At 8:00 am ET the 10-yr note yield remained unchanged from yesterday at 2.40%.

April NFIB small business optimism index is expected at 102.4 from 101.8 increased to 103.5. Overall all of the interior components improved. The report data collected was before the breakdown in trade talks so we can't put much significance to it.

April import and export prices at 8:30 am; import prices were expected to increase 0.7%. As reported they were up just 0.2%. Yr/yr they were expected to be down -0.3% but declined -0.2%. Exports were expected to be up +0.5%, but reported were up only 0.2%. Yr/yr they were thought to be +0.7% but added just 0.3%. Prices of petroleum imports were expected to rise, and they did, up 6.1 percent in April, but prices of non-petroleum imports fell sharply, down 0.6 percent in a specific result that points to downward pressure on core prices. Export prices were pulled down by an unexpectedly steep 1.5 percent decline in prices of agricultural exports in a result that is not positive for the US farm sector. Year-on-year agricultural export prices are down 2.8 percent in what offers a baseline measure going into the US-China tariff actions of May. The data that we've seen for April, whether continued weakness in portfolio management fees or apparel or airfares or import prices, all point to continued sub-par readings for core prices and with that a greater likelihood that, however distant, the next move for rate policy will be down not up.

More confusing news on the trade discussions; China and the United States have agreed to keep talking about their trade dispute, the Chinese government said this morning, as U.S. President Trump said he thought recent discussions in Beijing would be successful. "My understanding is that China and the United States have agreed to continue pursuing relevant discussions. As for how they are pursued, I think that hinges upon further consultations between the two sides," Chinese Foreign Ministry spokesman Geng Shuang said….he went on saying "We hope that the U.S. side does not misjudge the situation and not underestimate China's determination and will to safeguard its interests." The U.S. Trade Representative's office said it planned to hold a public hearing next month on the possibility of imposing duties of up to 25% on a further $300B worth of imports from China.

At 9:30 the DJIA opened +100, NASDAQ +50, S&P +12. The 10-yr stood at 2.41%, unchanged from yesterday, and earlier this morning the rate was lower at 2.38%.

CoreLogic is saying this morning that prices increased by 1% between February and March 2019. The HPI Forecast indicates prices will increase by 4.8% by March 2020. Home-price growth is still trending upward, but at a slower pace than a year ago.

Rates have declined over the last two weeks but MBS prices, although better, have lagged the move in treasuries. Stocks are taking hits on the significant turn in sentiment on trade. Until Sunday the consensus in markets was that a deal was imminent, but that hasn't happened. Investors are re-thinking what to do with the outlook for equities and are becoming less bullish if the trade issues continue. The 10-yr, although better, hasn't had the reaction we would have expected given the turmoil. There is a possibility the Fed may have to lower rates and stocks will be pressured; the 10 still has not fallen to test the drop to 2.36% at the end of March before yields increased and are now declining.

PRICES @ 10:00 AM

10 yr. note: -1/32 (3 bp) 2.41% unch

5 yr. note: unch 2.18% unch

2 Yr. note: unch 2.18% unch

30 yr. bond: -4/32 (12 bp) 2.84% unch

Libor Rates: 1 mo. 2.439%; 3 mo. 2.518%; 6 mo. 2.587%; 1 yr. 2.672% (5/13/19)

30 yr. FNMA 4.0: @9:30 102.78 +2 bp (+5 bp from 9:30 yesterday)

15 yr. FNMA 3.5: @9:30 102.58 +4 bp (+6 bp from 9:30 yesterday)

30 yr. GNMA 4.0: @9:30 103.31 unch (-4 bp from 9:30 yesterday)

Dollar/Yuan: $6.8760 -$0.0023

Dollar/Yen: 109.60 +0.30 yen

Dollar/Euro: $1.1212 -$0.0011

Dollar Index: 97.49 +0.14

Gold: $1299.00 -$2.80

Crude Oil: $61.57 +$0.51

DJIA: 25,447.50 +124.69

NASDAQ: 7689.71 +42.61

S&P 500: 2829.20 +17.33

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.

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Posted by Richard Sardella MLO.100007700/NMLS 233568 on May 14th, 2019 9:33 AM

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