November 17th, 2020 8:47 AM by Richard Sardella MLO.100007700/NMLS 233568
Stock indexes traded weaker this morning, the DJIA at 8:20 am ET -217 points; interest rates improved, 10 yr. at 8:25 am -2 bps to 0.88%. MBS prices at 8:25 am +8 bps. Yesterday the DJIA and S&P both made new all-time highs.
Key data points at 8:30 am ET, this morning; October retail sales, expected +0.4%, as released +0.3%, and September was revised from +1.9% to +1.6%. Excluding auto sales expectations were +0.5%, as reported +0.2% and Sept. was revised lower from +1.5% to +1.2%. The control group expected +0.4%, as reported, -0.1%. Eight of the 13 major retail categories decreased, led by clothing and sporting goods and hobby stores. Non-store retailers -- which include online vendors like Amazon.com Inc. recorded the biggest increase, at 3.1%. Sales were the weakest in six months, suggesting consumers are becoming more hesitant amid a surging pandemic and lack of fresh federal stimulus. November and December could prove tougher with states and cities re-imposing restrictions on indoor dining and non-essential business to contain a rampant coronavirus, while hopes for additional fiscal stimulus this year keep fading and political uncertainty hangs over government policy.
Our politicians continue to ignore the real need for another stimulus package for consumers suffering lost jobs and help from the prior stimulus that has run out. Millions of Americans will see their unemployment benefits disappear at the end of the year unless Congress extends pandemic-related programs that made the aid available to a wider swath of the workforce and for a longer period. The main hurdle is about Dems wanting huge money for states and cities that poorly manage budgets. The data assembled about the virus's cost to states is about $150B; Pelosi wants $500B to bail out those states. She won't bend, and Republicans lead by McConnell won't cave. The result is becoming increasingly clear that the recent strong rebound is slowing; the Fed's begging for consumer help is being ignored. Congress has time to do it before it goes on a break but so far, no movement.
October import prices declined 0.1% against forecasts of +0.2%, yr./yr. import prices thought to be -0.5% was -1.0%. Export prices expected +0.3% as reported +0.2%; yr./yr. -1.6% about as expected.
The reaction to the weaker sales in the futures trading in stocks, the DJIA at 8:45 am ET, -282; the 10 yr. note slipped to 0.87% -3 bp. MBS prices improved to +11 bps from yesterday.
At 9:15 am ET, October industrial production was stronger than forecasts, expected +1.0%, increased 1.1% manufacturing output expected +0.9% increased 1.0%. Sept production revised from -0.6% to -0.4%, Sept manufacturing output originally reported -0.3% revised to +0.1%. October capacity utilization was estimated at 72.2% and increased to 72.8%, and Sept revised from 71.5% to 72.0%.
At 9:30 am ET, the DJIA opened -272, NASDAQ unch, S&P -20. 10 yr. at 9:30 am 0.88% -2 bps. FNMA 2.0 30 yr. coupon at 9:30 am +6 bps from yesterday and +5 bps from 9:30 yesterday.
At 10:00 am ET, the November NAHB housing market index was thought to be at 85, unchanged from October; the index jumped to another record at 90.
This morning, National Mortgage News: The continual lag in housing inventory relative to demand and low mortgage rates kept homebuyer competition heated in October. While the share of home sales with bidding wars dwindled as activity slowed seasonally into the fourth quarter, October marked the sixth consecutive month where over half of the homes for sale faced competition, according to Redfin. About 56.8% of U.S. properties underwent bidding wars in October, down from September's revised rate of 57.4% and the 2020 peak of 59.3% in August. However, the share of bidding wars greatly surpassed the year-ago rate of 10.1%.
At 10:00 am ET, the MBS prices improved from 9:30 am; +13 bps from +5 bps at 9:30 am. The 10 yr. note down 3 bps. Still no change in our outlook, the longer look is the 10 yr. will move up to 1.0%, but the path to it will likely take time and with choppy moves. The key is 0.75%; as long as it holds on rallies, the bearish longer-term will remain intact. That said, it's a wide range between 0.90% and 0.75%.
PRICES @ 10:00 AM ET
10 yr. note: 0.87% -3 bp
5 yr. note: 0.39% -1 bp
2 Yr. note: 0.17% -2 bp
30 yr. bond: 1.62% -4 bp
Libor Rates: 1 mo. 0.143%; 3 mo. 0.220%; 6 mo. 0.249%; 1 yr. 0.339% (11/16/20)
30 yr. FNMA 2.0: @9:30 103.39 +6 bp (+5 bp from 9:30 yesterday)
30 yr. FNMA 2.5: @9:30 104.52 +9 bp (+11 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.53 +47 bp (+11 bp from 9:30 yesterday)
Dollar/Yuan: $6.5570 -$0.0277
Dollar/Yen: 104.11 -0.46 yen
Dollar/Euro: $1.1872 +$0.0019
Dollar Index: 92.38 -0.26
Gold: $1885.80 -$2.00
Crude Oil: $41.00 -$0.34
DJIA: 29,558 -392
NASDAQ: 11,867 -57
S&P 500: 3952 -34
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.