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Daily Market Analysis October 19, 2021

October 19th, 2021 8:42 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

Stock indexes began better early, the interest rate market unchanged.

Sept housing starts tumbled compared to forecasts. Starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month (estimates were 1.621 mi), the Commerce Department said this morning. Data for August was revised down to a rate of 1.580 million units from the previously reported 1.615 million units. Building permits declined 7.7% to a rate of 1.589 million units (estimates 1.680 mil). The current level of starts is up 7.4% compared with the same month a year earlier. Data for September came with a margin of error of 11.4 percentage points.

There isn’t any significant news so far today other than the Sept housing starts and permits that were weaker than forecasts. Looking over the news wires saw nothing that is of market-moving interest. The debate about inflation still pits central banks against markets. The Fed stands with its inflation forecasts although from ‘transitory’ defined by a few months, the Fed has moved to the reality that inflation presently is on the way higher. Its new outlook, that inflation will weaken in 2022. This morning in Europe a member of the ECB out mimicking the Fed, saying that there is no reason to raise rates in 2022 and that he is convinced that inflation will be back below 2.0% by the end of 2022.

The prices of many goods continue to increase; today Proctor and Gamble is raising prices on a host of household staples as costs for freight and raw materials rise faster than the consumer-product giant anticipated. The company said it would start charging more for certain beauty, oral care and grooming products such as razors. The price increases come in addition to earlier moves to start charging more for staples from diapers to toilet paper. While many pandemic-driven price pressures are easing, broader sources of higher inflation are replacing them. Difficult to measure actual inflation; some calculations point inflation increasing while other non-traditional ways to measure it are slowing. These alternative indexes are signaling “inflation is not as extreme as what the headline or traditional core shows right now, but it is picking up,” said Sarah House, director and senior economist at Wells Fargo. “All of these measures have moved from signaling price stability to signaling sharp accelerations in underlying inflation,” said Brent Meyer, an economist at the Federal Reserve Bank of Atlanta. The debate continues.

The 10 has increased 30 bps over the last month. Worries about inflation, it has found some very near support at 1.60% with those inflation concerns still alive but with the Fed and ECB continuing to downplay inflation in the longer run rates might stabilize at these levels; that is one thought. What markets should be focusing on now is wage pressures that are beginning to boil a little. After years of little power over wages unions may be getting a strong toe hold now. There are increasing numbers of walkouts and strikes occurring. John Deere had 10,000 workers go out on strike last week. The focus recently has been about prices increasing due to the supply issues, there hasn’t yet been much outward concern about wages, but it is brewing.

At 9:30 am ET the DJIA opened +93, NASDAQ +37, S&P +15. 10 yr. 1.61% +2 bps. FNMA 2.5 30 yr. coupon at 9:30 am unchanged and +8 bps from 9:30 am yesterday.

Correction: we reported that Bitcoin futures exchange-traded fund in the U.S. began yesterday; it began this morning. ProShares ETF plans to start the fund on the New York Stock Exchange today. The move is the latest sign of how cryptocurrency-related investments are becoming more mainstream.

No other scheduled news today, the 10 at its recent high at 1.61%. All of our technicals remain bearish near term; need a weekly close below 1.55% to change the tech outlook in the short term.

PRICES @ 10:00 AM

10 yr. note: 1.62% +3 bp

5 yr. note: 1.15% -2 bp

2 Yr. note: 0.39% -4 bp

30 yr. bond: 2.06% +2 bp

Libor Rates: 1 mo. 0.085%; 3 mo. 0.131%; 6 mo. 0.166%; 1 yr. 0.302% (10/18/21)

30 yr. FNMA 3.0: @9:30 am 104.28 unch (-3 bp from 9:30 am yesterday)

30 yr. FNMA 2.5: @9:30 am 102.47 unch (+8 bp from 9:30 am yesterday)

30 yr. GNMA 2.5: @9:30 am 102.31 +3 bp (+11 bp from 9:30 am yesterday)

Dollar/Yuan: $6.3861 -$0.0435

Dollar/Yen: 114.22 -0.10 yen

Dollar/Euro: $1.1652 +$0.0039

Dollar Index: 93.70 -0.26

Gold: $1778.10 +$12.40

Bitcoin: 62,952 +1,507

Crude Oil: $82.24 -$0.20

DJIA: 35,358 +99

NASDAQ: 15,069 +47

S&P 500: 4504 +18

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.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on October 19th, 2021 8:42 AM

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