Shiny Trinket

What's on the agenda for this week?

The last three sessions in the bond and mortgage markets haven’t seen any movement from the early morning prices and rates through the entire day; today is the same. MBS prices traded in a three basis point range and are ending the session where it started this morning.

This week Washington is facing another potential shutdown if by Friday there is no deal acceptable to President Trump and Republicans. Given all of the barbs and Democrats’ resolve to stop the Wall and Trump’s rock hard stance for it, it isn’t likely there will be a wall. As you know, he can try to use the emergency national security act to get funding from other sources and build it. Problem with that is there will be immediate lawsuits to stop it, likely leading to a temporary restraining order that when played out will potentially keep the Wall from being built.

Trade issues with China still working with negotiators in China now after two days in the US last week. There may be some progress with tariffs, but the main event is the intellectual property that China stalls and/or forces American companies to give up. China will probably be willing to import more US goods but getting any agreement over property rights is going to be difficult. On March 1st US tariffs on $200B of goods imported from China is set to increases from 10% to 25% unless Trump relents.

Another sour forecast for the equity markets this year; we've had downward revisions for growth the Fed, IMF, World Bank, the ECB, Bank of England and about anyone stepping up to offer their outlook. Today Vanguard Mutual funds with $5.3 trillion in US and global assets, saying the annual returns for investors in equities is about 5% return if you're lucky. As for the economy, which is coming off what's expected to be about a 3% growth rate for 2018, Vanguard sees U.S. gross domestic product rising around 2% this year. More sour news from Goldman Sachs, they're forecasting slower growth and profits for the rest of the year — which could be bad news for investors who missed January’s rally. “The rally we expected has happened swiftly, and given this we see relatively modest returns on equities from here," Goldman Sachs analyst Sharon Bell commented on CNBC this morning.

There were no data points today, tomorrow not much; the Jan NFIB small business optimism index expected at 103 from 104.4 in Dec. Dec JOLTS job openings, 6.900 mil from 6.888 mil in Nov. Jerome Powell will speak at 12:45 pm ET the subject, on economic development in high poverty rural communities at the Hope Enterprise Corporation Rural Policy Forum; but there will be Q&A that will likely lead to more questioning on the Fed’s outlook. Beginning Wednesday some of the delayed economic reports will begin trickling; CPI, Treasury Budget. Thursday retail sales, PPI. More will ooze out next week.

Our tech models are still positive although there has been minimal movement in either direction. Fundamentally there is reason to move money to safety.

This Week’s Calendar:

Tuesday,

6:00 am NFIB small business optimism index (103.0 from 104.4)

10:00 am December JOLTS job openings (6.950 mil from 6.888 mil)

Wednesday,

7:00 am weekly MBA mortgage applications

8:30 am Jan CPI (+0.1%; yr./yr. +1.5%; core CPI +0.2%; yr./yr. +2.1% down from +2.2% in December)

2:00 pm Dec Treasury Budget (-$12.0B)

Thursday,

8:30 am weekly jobless claims (225K -9K)

• Jan PPI (+0.2%)
• December retail sales (+0.1%, less autos +0.1%, less autos and gas +0.4%, control group +0.4%)

10:00 am November business inventories (+0.2%)

Friday,

8:30 am February Empire State manufacturing index (7.0 from 3.9)

• January import and export prices (imports and exports both +0.2%)

9:15 am January industrial production and factory use (production +0.2%; factory use 78.8% from 78.7%)

10:00 am University of Michigan mid-month consumer sentiment index (92.5 from 91.2 in Jan)

PRICES @ 4:00 PM

10 yr. note: -7/32 (22 bp) 2.65% +2 bp

5 yr. note: -4/32 (12 bp) 2.47% +3 bp

2 Yr. note: -2/32 (6 bp) 2.49% +3 bp

30 yr. bond: -14/32 (44 bp) 3.00% +3 bp

Libor Rates: 1 mo. 2.504%; 3 mo. 2.697%; 6 mo. 2.741%; 1 yr. 2.935% (2/8/19)

30 yr. FNMA 4.0: 102.19 -11 bp (+3 bp from 9:30)

15 yr. FNMA 3.5: 101.71 -5 bp (unch from 9:30)

30 yr. GNMA 4.0: 102.69 -9 bp) -1 bp from 9:30)

Dollar/Yuan: $6.7924 +$0.0476

Dollar/Yen: 110.40 +0.66 yen

Dollar/Euro: $1.1278 -$0.0048

Dollar Index: 97.07 +0.42

Gold: $1312.20 -$6.30 (strong dollar; gold trades in dollars)

Crude Oil: $52.39 -$0.32 (strong dollar; crude settles in dollars)

DJIA: 25,053.11 -53.22

NASDAQ: 7307.90 +9.71

S&P 500: 2709.80 +1.92

Red Diamond Home Loans NMLS# 1325498 was established by Mike Porter with his business partner, Mike Rogers, in 2015 with the simple mission of creating happy clients every day. With 30+ years in the Mortgage Banking industry, Mike has held a variety of roles primarily in large mortgage banking companies/banks that have given him opportunities to learn all aspects of the business. “I’ve been fortunate to have a very broad-based experience over the years with exposure to all facets of the mortgage business,” explains Mike. “I feel like that experience provides a good foundation for owning and running Red Diamond Home Loans.”

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