August 26th, 2021 9:06 AM by Richard Sardella MLO.100007700/NMLS 233568
The stock indexes at 8:30 am ET slightly better. Nothing has changed with traders and what the focus is; Jerome Powell’s remarks tomorrow at the virtual Jackson Hole gathering. Mr. Powell must clear a little air about tapering, inflation, and his economic outlook as the Delta variant is increasingly causing businesses to back off from the strong rebound.
At 8:30 am weekly Jobless claims a little firmer than forecasts, +4K to 353K on estimates of 340K; the first weekly increase in a month. The second look at Q2 GDP, +6.6% as expected, personal consumption +11.9% also as expected.
James Bullard, St. Louis Fed, on CNBC wants the tapering done by the end of Q1 2022; he joined an increasing view that inflation isn’t likely to moderate soon; the job market is a lagging indicator in his view, tapering will give the Fed more latitude for when the time to begin increasing interest rates.
The tapering by the Fed is the current headline, but inflation should be. Finally hearing more from officials that those ideas of short-lived inflation forecasts from the Fed led by Jerome Powell are mis-placed as we have been saying for weeks. Prices are increasing with increasing supply chain problems; the most recent setback is the Delta variant. Wages are increasing at the low end of the income sector and likely will extend to higher income earners, the $4.5 trillion increased spending working through Congress, all contributing to the change in inflation forecasts, at least among traders.
Jerome Powell will speak at 10 am tomorrow. That the in-person Jackson Hole meeting will be virtual adds more concern that Delta is increasing. Powell may have difficulty convincing markets that the Fed’s economic outlook is still valid. The in-person cancellation underscores the uncertainty officials face as they debate when to begin winding down the stimulus measures, they rolled out last year at the outset of the pandemic. The title of his speech; “Macroeconomic Policy in an Uneven Economy.” A few weeks ago, at the time of the July 27-28 Federal Open Market Committee meeting, the U.S. economy looked like it was roaring ahead; now, there’s a bigger question mark hanging over the labor-market recovery, which is crucial to the Fed’s plans. The meeting is underway, look for Fed officials’’ remarks; Dallas Fed Kaplan coming up.
At 9:30 am the DJIA opened +43, NASDAQ -3, S&P -2. 10 yr. at 1.35% unchanged. FNMA 2.0 20 yr. coupon at 9:30 am -2 bps; -19 bps from 9:30 am yesterday; 2.5 coupon -2 bps and -14 bps from 9:30 am yesterday.
At 1 pm Treasury will auction $62B of 7 yr. notes, yesterday the 5 yr. auction was OK but not aggressive at all.
Not expecting much movement today after the selling yesterday in preparation for Powell tomorrow, possibly a little weakness through the day.
PRICES @ 10 AM
10 yr. note: 1.16% -3 bp
5 yr. note: 0.65% -5 bp
2 Yr. note: 0.35% -3 bp
30 yr. bond: 1.80% -2 bp
Libor Rates: 1 mo. 0.085%; 3 mo. 0.134%; 6 mo. 0.151%; 1 yr. 0.241% (7/19/21)
30 yr. FNMA 2.0: @9:30 102.08 +27 bp (+30 bp from 9:30 am yesterday)
30 yr. FNMA 2.5: @9:30 104.05 +19 bp (+25 bp from 9:30 am yesterday)
30 yr. GNMA 2.5: @9:30 103.48 -14 bp (-7 bp from 9:30 am yesterday)
Dollar/Yuan: $6.4835 -$0.0070
Dollar/Yen: 109.56 +0.10 yen
Dollar/Euro: $1.1770 -$0.0030
Dollar Index: 93.12 +0.23
Gold: $1824.90 +$15.70
Bitcoin: 29,544 -1,144
Crude Oil: $66.04 -$0.38
DJIA: 34,453 +462
NASDAQ: 14,322 +47
S&P 500: 4297 +39
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.
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MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.