Interest rates early this morning were unchanged from Friday, but it didn’t last long. At 8:30 June retail sales +0.5% as expected, ex-auto sales +0.4% as expected; May revisions is the headline. May sales revised from +0.8% to +1.3%; ex-autos revised from 0.9% to +1.4%.
Also at 8:30 the July NY Empire State manufacturing index at 22.6 from 25 in June and expected at 21.0.
It’s the meeting between Trump and Putin that is drawing all focus.
The meeting is underway. Trump goes into it with a lot of boy scout bravado against Putin. President Trump commented last week that he and Putin might become friends. Trump is taking a lot of criticism about his positive comments and being pushed to confront Putin over the Russian hacking and in the mid-east. Saw President Trump and Putin on CNBC leading to the private talks; Trump being Trump with a lot of optimism while Putin glared at him. We will have to wait and see, but given Putin’s history, he isn’t likely to be too cooperative thinking he has the advantage now. Have no opinion at this point how markets will react to the likely press conference after the meeting if any.
At 10:00 May business inventories were expected +0.4%; the index as reported +0.4%.
The news today centers on Trump/Putin, but the more immediate focus should be on Fed Chair Jerome Powell testifying tomorrow and Wednesday in Congress. Rate increases are coming, but there is still debate within the markets about whether the Fed will do one more in Sept or another in December. The US economy is strong as evident in this morning’s retail sales. Strong gains for the discretionary categories of autos and restaurants and a big upward revision to May highlight the June retail sales report. Gains in auto sales point to new confidence among consumers and are consistent with the strength underway in the labor market. Building materials, at plus 0.8 percent in June, and furniture store sales, up 0.6 percent, are both positive indications for residential investment. Powell will field a lot of questions about the Fed’s outlook, and there'll be questions focusing on the trade tariffs and what Powell thinks about the US economic impact.
More data out of China is adding to concern its economy is slowing. Data released since Friday has affirmed what’s been expected for some time: That an ongoing campaign to curtail credit is putting the brakes on the world’s second-largest economy. Given that China generates as much as a third of global growth, that’s adding to signs that the best world expansion in years is plateauing. The IMF has worried the trade tariffs will slow growth; it is scheduled to release its latest forecast later today. China’s GDP is slowing, but it is still running at 6.7% although the weakest in two years.
The 10 and mortgage rates locked in a very narrow ranges, the 10 since June 27th trading between 2.88% and 2.82% the narrowest in over 2 years. Our technical work remains neutral reflecting the tight movements.
This Week’s Calendar:
8:30 am June retail sales as reported +0.5%, May revised
from +0.8% to +1.3%; excluding auto sale +0.4%, May revised from +0.9% to +1.4%.
- July NY Empire State manufacturing index expected at 21, as reported 22.6
10:00 am May business inventories expected at +0.4%, as reported +0.4%
9:15 am June industrial production and capacity utilization (production +0.6%, cap utilization 78.3% from 77.9% in May)
10:00 am Jerome Powell at the Senate Banking Committee
10:00 am July NAHB housing market index (69.0 from 68.0 in June)
7:00 am weekly MBA mortgage applications
8:30 am June housing starts and permits (starts -2.8% to 1320K; permits +2.4% to 1330K)
10:00 am Jerome Powell at the House Financial Services Committee
2:00 pm Fed Beige Book
8:30 am weekly jobless claims (220K +6K)
- July Philadelphia Fed business index (22.0 from 19.9)
10:00 am June leading economic indicators (+0.4%)
PRICES @ 10:00 AM
10 yr. note: -10/32 (31 bp) 2.865% +3.5 bp
5 yr. note: -5/32 (15 bp) 2.76% +3 bp
2 Yr. note: -1/32 (3 bp) 2.60% +2 bp
30 yr. bond: -25/32 (78 bp) 2.97% +4 bp
Libor Rates: 1 mo. 2.073%; 3 mo. 2.336%; 6 mo. 2.520%; 1
30 yr. FNMA 4.0 Aug: @9:30 101.86 -12 bp (-5 bp from 9:03 Friday)
15 yr. FNMA 4.0: @9:30 102.27 -13 bp (-8 bp from 9:30 Friday)
30 yr. GNMA 4.0: @9:30 102.58 -12 bp (-5 bp from 9:30 Friday)
Dollar/Yen: 112.33 -0.02 yen
Dollar/Euro: $1.1721 +$0.0040
Dollar Index: 94.50 -023
Gold: $1241.00 -$0.20
Crude Oil: $69.15 -$1.86
DJIA: 25,035.32 +15.91
NASDAQ: 7831.78 +5.81
S&P 500: 2798.84 -2.47