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Interest rates declining this morning and MBS prices improving. Stock indexes before the 9:30 am ET open generally unchanged.
Weekly jobless claims +2K to 208K; claims not a factor with traders these days with strong employment. Fed Ex, UPS, Amazon, and USPS all beginning to hire for the coming holidays.
Sept Philadelphia Fed business index expected at 11.0 hit at 12.0 from 16.8 in August. New orders held steady in the mid-20s, at 25.8, which is very strong and will support composite activity in the next report for October. One signal of moderation in today's report and that's the 6-month outlook which fell nearly 12 points to 20.8, which is modest for this reading. Confidence in future orders is down sharply this month, perhaps reflecting persistent questions over slowing global trade and slowing foreign demand for US goods. Signs of strength, an increase in the workweek are capped by an 8 point rise in input prices to 20.8 and the highest reading this year. Current indications in this report for the last three months have been posting the best readings of the year.
At 9:30 am ET the DJIA opened +51, NASDAQ +20, S&P +5. 10
yr. at 9:30 1.76% -3 bps. MBS prices +5 bps from yesterday's close and +8 bps from 9:30 yesterday.
At 10:00 am ET August existing home sales were thought to be weaker, down 0.75% to 5380K; as released 5490K, July revised lower from 5420K to 5350K. August +1.3%
yr./yr. +2.6% from +0.6% on July data. August leading economic indicators 0.0% as expected.
The Organization for Economic Cooperation and Development (OECD) said it now expects world output of goods and services to increase by 2.9% this year, the smallest annual rise since 2009 when the global economy was pushed into a recession by the near-collapse of the financial system. The OECD noted that the affiliates of US companies operating in China have sales that exceed total US exports to China.
Yesterday's FOMC statement and Powell's press conference can be summed up in a few words;
the Fed doesn't have a clear idea of what to do next with interest rates. Not a criticism, there is no clear view of the US/China trade conflict. The two sides are about to sit down (again) to begin discussions with senior officials joining later in October. It's reasonable now to think some kind of agreements may begin to emerge; both sides have to accept the reality that neither will end up with what they are asking for. On future rate cuts, it is a toss-up at the Fed and in the markets. Three voters yesterday dissented, two didn't want a cut yesterday, and one wanted a 50 bp cut.
Powell at his press conference admitted there are differences within the Fed about future moves. Again and again, he reverted to no-answer answers, saying he and his colleagues would take things "meeting-by-meeting," that they "made one decision today," and would "act as appropriate" in response to incoming data to keep the longest US economic expansion on record from stumbling into the ditch. Powell is quickly gaining the reputation of dodging any significant guidance. He doesn't commit or offer forward opinions.
US/China negotiations start today in Washington with second-string players;
the goal is to outline key issues aimed at laying the groundwork for high-level talks in early October that will determine whether the two countries are working toward a solution or are headed for new and higher tariffs on each other's goods. Two negotiating sessions over the two days will cover agricultural issues, while just one will be devoted to the strengthening of China's intellectual property protections and the forced transfer of US technology to Chinese firms.
Technically the 10 yr. is at a key level this morning at its 20 day moving average and the momentum index is back to the 50 neutral level. Fundamentally interest rates will likely hold at current or lower levels with safety moves still happening related to the situation with Iran. Most governments are now in sync that Iran was responsible but other than Pres. Trump indicating increased sanctions the US together with the Saudis haven't agreed on what to do militarily with the Iran surrogates. Meanwhile, Iran talking tough about any attacks and saying it is ready to rumble.
PRICES @ 10:00 AM
10 yr. note: 1.77% -1 bp
5 yr. note: 1.65% -2 bp
2 Yr. note: 1.73% -3 bp
30 yr. bond: 2.22% -3 bp
Libor Rates: 1 mo. 2.044%; 3 mo. 2.155%; 6 mo. 2.081%; 1
yr. 2.064% (9/18/19)
30 yr. FNMA 3.5: @9:30 102.38 +5 bp (+8 bp from 9:30 yesterday)
15 yr. FNMA 3.0: @9:30 102.00 +4 bp (-1 bp from 9:30 yesterday)
30 yr. GNMA 3.5: @9:30 103.63 +9 bp (+12 bp from 9:30 yesterday)
Dollar/Yuan: $7.0945 +$0.0085
Dollar/Yen: 108.00 -0.45 yen
Dollar/Euro: $1.1064 +$0.0034
Dollar Index: 98.27 -0.29
Gold: $1509.40 -$6.40
Crude Oil: $58.86 +$0.75
DJIA: 27,210.71 +61.63
NASDAQ: 8225.01 +46.62
S&P 500: 3016.36 +9.63
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