November 5th, 2020 9:06 AM by Richard Sardella MLO.100007700/NMLS 233568
Stock indexes continued to increase this morning, the 10 yr. note and MBS markets added to yesterday’s very strong gains. Weekly jobless claims at 8:30 am ET were in line with estimates at 751K down 7K; the 4 week average of claims 787K down 4K from the previous week. Q3 preliminary productivity expected +5.0% was +4.9%; Q3 unit labor costs expected -12.3% dropped 8.9%. The two 8:30 am ET releases had no impact on markets.
No conclusion on the presidential election, but the odds have increased that Biden will win. Markets are rallying on the reality that there is no Blue Wave mandate that was worrying markets two weeks ago. No Blue Wave mandate lessens the far left influence in the Democratic party with its New Deal, tax increases, and at least for the next two years, neither party can run roughshod over the other. The Senate will stay in the hands of Republicans, and at the moment, it looks like Republicans will add three or four seats in the House.
Other state issues that were on the ballots, according to the current reporting, were mostly won by the conservative voters. What can be said, and we will hear about it a lot, the combination of a tight election, the Senate staying in the hands of Republicans, the voters rejected a lot of the platform of Democrats that were formulated by The Squad. It is a plus for markets; Democratic leadership won’t get many of those ideas through that markets were worried about two weeks ago that drove stocks (almost 2K for the DJIA). From the perspective of markets, the results are seen as good. Wall Street likes gridlock for the moment. The first step is the stimulus package. The present congress and administration will continue until January; the economy is slowing somewhat now; the country needs more fiscal spending. Will politicians get something done?
This afternoon the FOMC policy statement at 2:00 pm ET. Look for the Fed to accentuate the need for stimulus to keep the economic outlook improving. Most Fed officials and the previous FOMC meeting have increased the pressure on Congress and Administration to pass a bill that will assist many consumers who have been hit hard. The original stimuli have run out. Since there was no Blue Wave, maybe it can get done soon. If markets wake up and believe there won’t be a stimulus any time soon, it won’t sit well with investors.
At 9:30 am ET, the DJIA opened +390, NASDAQ +214, S&P +55. 10 yr. at 9:30 am 0.77% -1 bp. FNMA 2.0 30 yr. coupon +16 bps from yesterday’s close and +20 bps from 9:30 am yesterday.
We have the FOMC meeting and Powell’s press conference at 2:00 pm ET and 2:30 pm, respectively. Election voting isn’t likely to change much. The delays in some states are going to take a few days, according to pundits.
The 10 yr. improved yesterday, taking its yield back to its technical resistance at 0.74%. MBS prices on the 2.0 coupon close to its high price in early August.
PRICES @ 10:00 AM ET
10 yr. note: 0.77% unch
5 yr. note: 0.33% unch
2 Yr. note: 0.16% +1 bp
30 yr. bond: 1.54% unch
Libor Rates: 1 mo. 0.136%; 3 mo. 0.232%; 6 mo. 0.243%; 1 yr. 0.333% (11/4/20)
30 yr. FNMA 2.0: @9:30 103.75 +16 bp (+20 bp from 9:30 yesterday)
20 yr. FNMA 2.5: @9:30 104.59 +5 bp (+7 bp from 9:30 yesterday)
30 yr. GNMA 2.5: @9:30 104.64 -3 bp (+6 b p from 9:30 yesterday)
Dollar/Yuan: $6.6134 -$0.0401
Dollar/Yen: 103.75 -0.77 yen
Dollar/Euro: $1.1834 +$0.0112
Dollar Index: 92.66 -0.74
Gold: $19333.90 +$37.70
Crude Oil: $39.02 -$0.13
DJIA: 28,332 +480
NASDAQ: 11,882 +291
S&P 500: 3513 +70
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.