November 8th, 2018 9:30 AM by Richard Sardella MLO.100007700/NMLS 233568
After the strong improvement in stock indexes yesterday, this morning stocks are quiet ahead of the FOMC policy statement at 2:00 pm ET. The bond market is experiencing some slight improvement in early trading.
Weekly jobless claims, is the only data today — not a factor in trading, at 214K, down -1K. Claims have been locked into a tight range now for six weeks at low levels, and traders don’t pay as much attention to claims with the unemployment so low.
Gridlock appears to suit the stock market just fine given the reaction yesterday. President Trump’s press conference yesterday afternoon set some sparks flying. Overall he said he is prepared to work with Democrats as they take control of the House. He sought to frame the politics of divided government to his advantage, setting up Democrats as an obstructionist party motivated by a zeal to bring down his presidency. “Now, we have a much easier path because the Democrats will come to us with a plan for infrastructure, a plan for healthcare, and we’ll negotiate.” Trump warned that cooperation would be impossible if House Democrats seek to paralyze the White House with a blitz of congressional probes and subpoenas. He went on to say if investigations and probes lead to subpoenas he would reciprocate with Democrats themselves.
Yesterday began the president’s 2020 campaign. With the midterms behind him, he dove into a reelection campaign facing a Democratic House, political gridlock — and special counsel Robert Mueller's Russia probe. Sessions “resigned” yesterday. His temporary replacement, Matthew Whitaker, formerly Sessions’ chief of staff, will assume oversight of Mueller and his continuing Russian election probe from Deputy Attorney General Rod Rosenstein. Whitaker has been an outspoken critic of the Russian investigation and Mueller; he wrote an opinion piece for CNN entitled “Mueller’s investigation of Trump is going too far” and said the president’s personal finances should be considered off-limits. This situation will likely lead to House investigations about Sessions’ firing. Government ethics regulation, federal employees are required to recuse themselves from matters where their impartiality could reasonably be questioned; the reason Sessions recused himself since he was a Trump supporter in the early days.
The FOMC policy statement at 2:00 pm will strongly confirm a rate increase at the December meeting. The focus will be on any clues pointing to more increases in 2019. While it’s not news that the Jerome Powell and most of the Fed are aiming for another two or three increases next year, it will depend on whether the Fed believes the economy can stand more increases.
At 9:30 am the DJIA opened down -43, the NASDAQ dropped -31, and the lost S&P -8. The 10-yr stood at 3.21%, down -2 bp.
We anticipate no real news until 2:00 pm, when the FOMC policy statement is released. The 10-yr is at another key level at 3.21%. Late yesterday the note moved to 3.23%, the high for the year since September. The statement will affirm a rate increase in December; the focus will be on how the FOMC frames next year’s potential increases.
PRICES @ 10:00 AM
10 yr. note: +7/32 (22 bp) 3.21% -2 bp
5 yr. note: +2/32 (6 bp) 3.06% -2 bp
2 Yr. note: unch 2.96% unch
30 yr. bond: +10/32 (31 bp) 3.415% -1.5 bp
Libor Rates: 1 mo. 2.315%; 3 mo. 2.601%; 6 mo. 2.843%; 1 yr. 3.125%
30 yr. FNMA 4.5: @9:30 102.13 +3 bp (-7 bp from 9:30 yesterday)
15 yr. FNMA 4.0: @9:30 101.55 +9 bp (-1 bp from 9:30 yesterday)
30 yr. GNMA 4.5: @9:30 102.43 +18 bp (+17 bp from 9:30 yesterday)
Dollar/Yuan: $6.9328 +$0.0128
Dollar/Yen: 113.66 +0.14 yen
Dollar/Euro: $1.1437 +$0.0011
Dollar Index: 96.13 -0.03 yen
Gold: $1226.00 -$2.70
Crude Oil: $61.06 -$0.61
DJIA: 26,183.90 +3.60
NASDAQ: 7556.11 -14.64
S&P 500: 2811.85 -2.04
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.