ON THIS DAY in 1939 -SUSAN TURNER MORTGAGE

2017

On this day in 1939, America's citizens demanded a celebrity, a superstar…..and they got one. It was a strange time. Europe was on the verge of war (although few knew it, so was the rest of the world). The U.S. economy had begun to shrug off the depression, but a recent spate of layoffs raised fears of an economic rollover. And educators complained that children weren't learning since they spent too much time sitting around the living room listening to that demon…..the radio.

 

Into this world came the New York World's Fair of 1939.  Young men reveled in the "the parachute jump" not realizing that, in a few years, they would be drafted to do the real thing.  And there was the world of tomorrow and other pavilions promising the wonders of automation (like refrigerators).   And, of course, there were Product Pavilions.

 

One of them belonged to the Borden Company.  But guides there reported that while visitors seemed to enjoy the display, from children through adults, they all asked, "Where's Elsie?"   Elsie was the cartoon cow that showed up on ads for Borden dairy products.

 

A savvy PR man smelled a winner and went for it.  He searched company- related dairy barns looking for a good-looking cow. The one he found was an attractive Jersey conveniently named "You'll do."  When the new "Elsie" was put on display, traffic to the exhibit tripled. Several moviemakers offered her contracts (a bovine Rin Tin Tin?).  When war did break out, the government recruited Elsie for national tours to sell war bonds.  (She sold over $10,000,000; not bad when the average weekly pay was $35.)  When word leaked out that Elsie was pregnant, public interest was so great that she delivered…..where else…..in Macy's window (34th Street side -- I think).  And so…..from not even existing four years earlier, the invented celebrity animal became one of the ten most popular figures when America was at war. As Lady Gaga may have said on either Oprah or whomever.....Thank goodness the American public is no longer so frivolous.

 

Things were neither frivolous nor frothy on Wall Street Thursday.  In fact, trading was a bit dull and the tone was rather downbeat. A final hour selloff took the Dow and S&P into mild negative territory, while NASDAQ was buoyed by the biotech’s and manages to hold on for a small gain on the close.

Real World – 6-23-17 

Crude Stabilizes and Health Care Surges In an Otherwise Listless Day

– As U.S. stocks opened Thursday; traders continued to watch what was happening in the crude pits.  What they saw was rather indifferent trading, but that was a refreshing change from the near freefall seen in recent sessions.

 

Traders kept watching to see if oil could remain stable.  That mild apprehension kept equity trading light and rather narrow.

 

Then, shortly after 10:30, crude began to inch higher, punching above the $43 level. That perked up trading in stocks and the indices moved higher to what would be the high of the day.

 

As oil stocks moved higher, I sent this email to some friends:

 

Oil enjoys very mild bounce partly on oversold washout yesterday and partly on assumption that the new heir to the Saudi throne will try to get prices higher to help the Aramco IPO.

 

Notice that the oil turn has not helped the energy stocks, showing  the high level of skepticism about the upturn.

 

Also, helping the stock rally was a breakout in the healthcare sector.  Bio-techs shot up as did hospitals, insurers and drug companies.  The catalyst was a look at some features of the Senate's healthcare proposal.

 

Ironically, the healthcare surge was not because the bill's passage looked probable but, rather, because the first draft contained nothing harsh or harmful for any of the healthcare group.

 

As we moved into midafternoon, the rally in crude began to fade and WTI slipped below $43. That inspired a bit of a pullback in stocks in general.

 

An indicated market on close sell program spooked the market a bit in the final forty minutes and selling accelerated. Volume was light.  Another waste of carfare and a clean shirt.

 

Today's Russell Rebalance – Earlier in the week, there were many rumors that today's rebalancing would be absolutely enormous, with claims it would set volume records. As the day approached, the rumors have moderated a bit, but just a bit.

 

We are reasonably sure that it will be larger than last year's rebalance, which was quite large. There is speculation that we could see about $23 billion in net turnovers.

 

By sector, energy may see the most to buy (just under $2 billion) and financials the most to sell (circa $2.6 billion). So buy an extra coffee because you want to stay to awake for this one.

Overnight And Overseas – In Asia, Tokyo and Hong Kong see only very minor changes.  China saw a modest gain with a modest loss in India.

 

In Europe, London was down on the anniversary of the Brexit vote. Markets on the continent saw more modest losses.

 

Gold is up and crude is a few pennies higher. The euro is a touch higher against the dollar, while Treasury yields are up a couple of ticks.

 

Consensus – Russell day brings high volume but volatility tends to be rather limited. We'll assume that will be today's case.

 

Stay wary, alert and very, very nimble. Have an absolutely wonderful weekend.

 

Trivia Corner

 

Answer: James Buchanan, Jr. has been the only bachelor president in the American history. His niece, Harriet Lane acted as First Lady of the U.S.

 

Today's Question: What planet is named for the Roman god of commerce, travel, and thievery?

 

Weekly report Susan Turner Mortgage

 

Weekly Review

 

The stock market ended the week in “mixed” fashion with the Dow Jones Industrial Average achieving a modest advance while the NASDAQ Composite and S&P 500 Indices traded lower.  Technology stocks in particular were hit with some profit-taking, especially on Friday, possibly due to surprising election results in Great Britain showing the Conservative Party losing its parliamentary majority.  The technology laden NASDAQ-100 Index saw a loss of 3.8% on Friday prompting investors to buy safe-haven assets such as Treasuries.

 

On the political scene, market tensions appeared to be relieved after highly anticipated testimony from former FBI Director James Comey before the Senate Intelligence Committee indicated there was no collusion between President Trump and Russia to influence the presidential election.  There was also no testimony from Comey suggesting Trump obstructed any investigations into Russian campaign interference.  Investors were also relieved when the European Central Bank decided to leave interest rates unchanged.

 

The week’s economic calendar was rather light, although the Labor Department released a couple of favorable reports showing continued strength in the labor market.  First, the JOLTS Job Openings report showed job openings reached a record high in April and were almost one million ahead of hirings.  Secondly, weekly Initial Jobless Claims continued to decline and remained close to historic lows, while the four-week moving average of claims fell to 1.915 million, a level not seen since the early 1970s.

 

This coming Wednesday the Federal Reserve (FOMC) is scheduled to release its latest monetary policy decision.  It is widely anticipated there will be a quarter of a point increase in the fed funds rate.  In fact, the fed funds futures market continues to show a 95.8% implied probability of a 25 basis point rate hike.

 

There were no housing reports released during the week other than weekly mortgage data.

Mortgage application volume increased during the week ending June 2.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) rose 7.1%.  The seasonally adjusted Purchase Index advanced 10.0% from the prior week to its highest level since May 2010, while the Refinance Index decreased 3.0%.  

 

Overall, the refinance portion of mortgage activity decreased to 42.1% total applications from 43.2% from the prior week.  The adjustable-rate mortgage share of activity decreased to 7.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance fell to 4.14% (its lowest level since November 2016) from 4.17% with points increasing to 0.34 from 0.32.

 

For the week, the FNMA 3.5% coupon bond lost 15.6 basis points to close at $103.219 before undergoing a monthly bond rollover that ended with the bond being repriced at $103.05.  The 10-year Treasury yield increased 4.32 basis points to end at 2.2023%.  Stocks ended the week “mixed.”

 

The Dow Jones Industrial Average added 65.68 points to end at 21,271.97.  The NASDAQ Composite Index fell 97.88 points to close at 6,207.92 and the S&P 500 Index dropped 7.30 points to close at 2,431.77.  Year to date on a total return basis, the Dow Jones Industrial Average has gained 7.64%, the NASDAQ Composite Index has advanced 15.32%, and the S&P 500 Index has risen 8.62%.

 

This past week, the national average 30-year mortgage rate rose to 4.01% from 3.98%; the 15-year mortgage rate increased to 3.26% from 3.24%; the 5/1 ARM mortgage rate rose to 3.05% from 3.04%; and the FHA 30-year rate was unchanged at 3.75%.  Jumbo 30-year rates increased to 4.29% from 4.27%.

Mortgage Rate Forecast with Chart - FNMA 30-Year 3.5% Coupon Bond 

 

The FNMA 30-year 3.5% coupon bond ($103.05, -19 bp) traded within a narrow 39 basis point range between a weekly intraday high of $103.53 on Tuesday and a weekly intraday low of $103.14 on Friday before closing the week lower at $103.05 following a monthly bond rollover re-pricing.

 

The bond traded up to its nearest resistance level on Tuesday before being turned away from this level.  The bond subsequently traded down to its 200-day moving average support level during the remainder of the week before undergoing a monthly coupon repricing on Friday that reset the price below this level.  The bond remains “overbought” as shown by the slow stochastic oscillator, so we may continue to see the bond move toward the 25-day moving average.  The economic calendar picks up steam with a number of significant reports that could drive prices in either direction.  It is possible we could see the bond trade between the 200-day moving average and the 25 and 50-day moving averages.  Should this occur, mortgage rates should remain close to where they currently are in the coming week.

Mortgage Market Wrap 7-7-17 SUSAN TURNER MORTAGE

Friday...

Stocks have ended the day higher. The Dow closed 94.30 at 21,414.34 and the S&P 500 closed 15.43 at 2,425.18. Mortgage Bonds finished the session -5bp at 102.38. The BLS reported that there were 222,000 jobs created in the month of June, which was 52,000 better than market expectations of 170,000. Additionally, there were positive revisions to April and May. April was revised up from 174,000 to 207,000 and May was revised up from 138,000 to 152,000. With these revisions, employment gains in April and May combined were 47,000 more than previously reported.

The Household Survey, which is where the Unemployment Report is derived from, showed that 245,000 jobs were created in June. At the same time, 361,000 people entered the labor force, which is why the Unemployment Rate increased from 4.3% to 4.4%. The U-6 Unemployment number, which takes into consideration discouraged workers and those who want to work full-time but can only find part-time work, increased 0.2% from 8.4% to 8.6%.

Average Hourly earnings rose 0.2%, which keeps the year over year reading steady at 2.5%. This did keep inflation fears at bay. Economic Data BLS Employment Report: Actual = 222,000; Consensus = 170,000; Prior = 152,000

Upcoming Events

Next week will be highlighted by a 10-year Treasury and 30-year Bond Auction, the Consumer Price Index Report, and several Fed Speakers, including Janet Yellen. Technical PictureMortgage Bonds closed the day right in the middle of the range between overhead resistance at

their 100­day Moving Average and support at 102.219...which is about 20bp beneath present

levels. The 10-year Treasury Note Yield tested the important 2.385% level throughout the day and closed right on it. A convincing break above this level could see yields move up towards 2.42%. Position

Locking Bias

HISTORY - THIS DAY 1833 - INTERESTING READ AND LEARN

 

On this day (-1) in 1833, a future President of the United States took a test required by the government. The testee's name was Abraham Lincoln.  And the test was.....oh put your hand down this isn't  the third grade!   No, it wasn't a college test (he never went).  No, it wasn't the bar exam (some claim he never took that either.....although you're really close).

 

Remember what was going on......The Black Hawk War had begun the year before.   Those ungrateful Sauk Indians had failed to understand the government's gift of the only lousy farmland in Iowa in exchange for their former Illinois property where the corn tended to grow eight feet high.  The Indians sent two braves,  under cover of white flags, to inquire about the problem of corn now growing six inches on the new land and the corn growing eight feet on the prior property.  Realizing that this was probably a trick question, the locals asked the Indian delegation to raise the white flags higher so they might make better targets.   The Indians complied and the townsfolk dutifully shot them.  Chief Black Hawk did not understand that this was a scientific experiment and began killing the settlers.   The result was a nasty  "war"  in which several settlers  and virtually all of the Indians were killed.

 

After the war had erupted, most of the local boys were pressed into service to protect the region.   Among them was a wiry beanpole named Abraham Lincoln who was placed in charge of a mini-platoon.   Lincoln would later recall that once while marching his troop across a field, they came upon a fence. Not knowing the proper military commands to march the boys over or around the fence, Lincoln simply ordered them to "dismiss and re-assemble on the other side."

 

Anyway (if you're still awake), Lincoln impressed several neighbors in this war by (a) not getting killed and (b) making sure that some of the other guys did get killed.  So…..compounding his new popularity, Lincoln took the next logical step.....no not a run for political office.....I said logical…..he opened a saloon.   He and a pal opened a joint called "Berry and Lincoln."   So on this day, Abe got certified as a bartender/bar owner.  (I told you were close with "Bar Exam.")

 

Shortly thereafter, he also got the nickname "Honest Abe."  (No, not because he walked through a snowstorm to return change!  No, not because he never shut off  "Happy  Hour"  too early!   Rather  it was  because he was  always thought  to be fair in judging the "cockfights" that he and Berry dreamed up to promote added traffic in their tavern.)

 

Even Honest Abe likely would have had whiplash from the trapdoor move and reversal late Tuesday morning. In the end, market wise, it appeared to be much ado about not very much.

 

Washington Influences Swing Stocks Both Ways – Tuesday's market began the session in a dull and rather indecisive manner. While the immediate post-opening looked mixed, all eleven sectors of the S&P were in the red, albeit marginally.

 

Shortly after 10:00, the bulls regrouped and stocks began to inch higher. By 11:00, stocks were back to Monday's highs and began to stall.

 

Just then the twitter-verse exploded into action about the release of several emails involving Donald Trump, Jr about a meeting he had with a Russian attorney.

 

Equity prices instantly imploded, with the Dow plunging over 140 points in a matter of minutes. I was asked to go on CNBC and put the freefall into some perspective.

I said that the severity of the fall was a bit anomalous. I outlined my analysis and later summed it up in this email to some friends:

 

Equity  market reaction to Trump, Jr  emails looks  a little disproportional.   No corresponding  flight to safety spikes in Treasuries, the dollar or gold makes me think selling  in a thin summer  market (and awaiting Yellen) found a vacuum on the bid side.  That would also fit with them paring the losses with a float.

 

Sure enough the equity markets pared their losses by two-thirds in a light volume levitation that took only about thirty minutes.

 

The bounce-back stalled when the Dow reached the levels of the immediate post-opening lows.  Stocks then shifted to a lateral drift.

 

That drift continued until about 1:40, when a rally sprang from a new set of political headlines, which I noted in a follow-up email.

 

Market jumps on Senate delay of August recess - - agenda hope.

 

That took the Dow back up to the post-opening highs by 2:00 and then reverted to another lateral drift.

 

In the closing minutes, there were rumors that there might be a billion dollars for sale on the bell, but no last minute selloff developed.

 

Advances and declines were virtually equal and volume was mediocre, enforcing the thin market hypothesis.

 

Overnight And Overseas – In Asia, markets are mixed. Tokyo and Shanghai saw modest losses while Hong

Kong and India saw gains of similar size.

 

In Europe, markets are seeing solid gains. London leads the pack, rising nearly a full percent while continental markets are up about three-quarters of that amount.

 

Crude having a very solid bounce on the sharp drop in API inventories last night.  Gold is up a touch but still looks uncertain. Yields are unchanged while the euro dips very slightly against the dollar.

 

 

Consensus – Yellen testifies at 10:00 but text may be released at 8:30. At 2:00, we will get the Fed Tan Book, which traders will compare carefully with Yellen's testimony.

 

The market is Yellen's to move.

 

Stay wary, alert and very, very nimble.

 

Trivia Corner

 

Answer – Yesterday's questions was - Who said "You can fool all of the people some of the time, and some of the people all of the time, but you can't fool all the people all the time."? Answer - Abraham Lincoln

 

Today's Question - The title of what 1968 Beatles song contained  six 2-letter words?

 

 

 

 

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Susan Turner Mortgage Presents- This Day in History

On this day in 1939, America's citizens demanded a celebrity, a superstar…..and they got one. It was a strange time. Europe was on the verge of war (although few knew it, so was the rest of the world). The U.S. economy had begun to shrug off the depression, but a recent spate of layoffs raised fears of an economic rollover. And educators complained that children weren't learning since they spent too much time sitting around the living room listening to that demon…..the radio.

 

Into this world came the New York World's Fair of 1939.  Young men reveled in the "the parachute jump" not realizing that, in a few years, they would be drafted to do the real thing.  And there was the world of tomorrow and other pavilions promising the wonders of automation (like refrigerators).   And, of course, there were Product Pavilions.

 

One of them belonged to the Borden Company.  But guides there reported that while visitors seemed to enjoy the display, from children through adults, they all asked, "Where's Elsie?"   Elsie was the cartoon cow that showed up on ads for Borden dairy products.

 

A savvy PR man smelled a winner and went for it.  He searched company- related dairy barns looking for a good-looking cow. The one he found was an attractive Jersey conveniently named "You'll do."  When the new "Elsie" was put on display, traffic to the exhibit tripled. Several moviemakers offered her contracts (a bovine Rin Tin Tin?).  When war did break out, the government recruited Elsie for national tours to sell war bonds.  (She sold over $10,000,000; not bad when the average weekly pay was $35.)  When word leaked out that Elsie was pregnant, public interest was so great that she delivered…..where else…..in Macy's window (34th Street side -- I think).  And so…..from not even existing four years earlier, the invented celebrity animal became one of the ten most popular figures when America was at war. As Lady Gaga may have said on either Oprah or whomever.....Thank goodness the American public is no longer so frivolous.

 

Things were neither frivolous nor frothy on Wall Street Thursday.  In fact, trading was a bit dull and the tone was rather downbeat. A final hour selloff took the Dow and S&P into mild negative territory, while NASDAQ was buoyed by the biotech’s and manages to hold on for a small gain on the close.

Real World – 6-23-17 

Crude Stabilizes and Health Care Surges In an Otherwise Listless Day

– As U.S. stocks opened Thursday; traders continued to watch what was happening in the crude pits.  What they saw was rather indifferent trading, but that was a refreshing change from the near freefall seen in recent sessions.

 

Traders kept watching to see if oil could remain stable.  That mild apprehension kept equity trading light and rather narrow.

 

Then, shortly after 10:30, crude began to inch higher, punching above the $43 level. That perked up trading in stocks and the indices moved higher to what would be the high of the day.

 

As oil stocks moved higher, I sent this email to some friends:

 

Oil enjoys very mild bounce partly on oversold washout yesterday and partly on assumption that the new heir to the Saudi throne will try to get prices higher to help the Aramco IPO.

 

Notice that the oil turn has not helped the energy stocks, showing  the high level of skepticism about the upturn.

 

Also, helping the stock rally was a breakout in the healthcare sector.  Bio-techs shot up as did hospitals, insurers and drug companies.  The catalyst was a look at some features of the Senate's healthcare proposal.

 

Ironically, the healthcare surge was not because the bill's passage looked probable but, rather, because the first draft contained nothing harsh or harmful for any of the healthcare group.

 

As we moved into midafternoon, the rally in crude began to fade and WTI slipped below $43. That inspired a bit of a pullback in stocks in general.

 

An indicated market on close sell program spooked the market a bit in the final forty minutes and selling accelerated. Volume was light.  Another waste of carfare and a clean shirt.

 

Today's Russell Rebalance – Earlier in the week, there were many rumors that today's rebalancing would be absolutely enormous, with claims it would set volume records. As the day approached, the rumors have moderated a bit, but just a bit.

 

We are reasonably sure that it will be larger than last year's rebalance, which was quite large. There is speculation that we could see about $23 billion in net turnovers.

 

By sector, energy may see the most to buy (just under $2 billion) and financials the most to sell (circa $2.6 billion). So buy an extra coffee because you want to stay to awake for this one.

Overnight And Overseas – In Asia, Tokyo and Hong Kong see only very minor changes.  China saw a modest gain with a modest loss in India.

 

In Europe, London was down on the anniversary of the Brexit vote. Markets on the continent saw more modest losses.

 

Gold is up and crude is a few pennies higher. The euro is a touch higher against the dollar, while Treasury yields are up a couple of ticks.

 

Consensus – Russell day brings high volume but volatility tends to be rather limited. We'll assume that will be today's case.

 

Stay wary, alert and very, very nimble. Have an absolutely wonderful weekend.

 

Trivia Corner

 

Answer: James Buchanan, Jr. has been the only bachelor president in the American history. His niece, Harriet Lane acted as First Lady of the U.S.

 

Today's Question: What planet is named for the Roman god of commerce, travel, and thievery?

 

Susan Turner Weekly Mortgage News May 12, 2017

Weekly Review

The major stock market indexes extended their gains with the S&P 500 Index and the Nasdaq Composite Index both reaching new all-time highs during the week.  A mixture of diverse earnings reports, political events, and economic news prompted investors to take a wait-and-see approach during the week which translated into modest market swings.  The earnings calendar was led by technology titan Apple which ended the week with a five point gain even though 2nd quarter revenue and future guidance reported after the close on Tuesday seemed to disappoint a number of investors.

Political events included legislation to continue funding the federal government until September and passage in the House of Representatives for a health care plan alternative to the Affordable Care Act.  Investors also cast their attention on an upcoming presidential run-off election (Sunday May 7) between polling favorite and pro-European Union (EU) globalist Emmanuel Macron and anti- EU nationalist Marine Le Pen.  Global markets reacted favorably ahead of the election as it was believed a Macron win would be more beneficial for the EU economy.

Economic reports were mixed during the week, but these were overshadowed by the Labor Department’s April Employment Situation Summary (Jobs Report).  The report was stronger than forecast with nonfarm payrolls reaching 211,000 versus expectations for 180,000 new jobs.  Non-farm private payrolls added 194,000 jobs versus a forecast of 175,000.  The unemployment rate fell to a decade low of 4.4% and was lower than the consensus forecast of 4.6%.  Average hourly earnings increased 0.3% to match the consensus forecast while March’s reading was revised lower to 0.1% from 0.2%.  The average workweek was reported at 34.4 hours – in line with estimates.

The bond market initially reacted negatively toward the jobs report on Friday before recovering, but was pressured lower earlier in the week after the Federal Reserve’s post-FOMC meeting statement Wednesday regarded weak first-quarter growth as “transitory.”  This strengthened expectations for a June rate hike and drove Treasury yields higher.   Indeed, the fed funds futures market is currently pricing in a 78.5% probability for a rate hike at the next Fed meeting on June 14.

As for mortgages, mortgage application volume fell slightly during the week ending April 28.  The Mortgage Bankers Association (MBA) reported their overall seasonally adjusted Market Composite Index (application volume) retreated 0.1%.  The seasonally adjusted Purchase Index increased 4.0% from the prior week, while the Refinance Index decreased 5.0%.  Overall, the refinance portion of mortgage activity decreased to 41.6% total applications from 44.0% from the prior week.  The adjustable-rate mortgage share of activity decreased to 8.4% of total applications.  According to the MBA, the average contract interest rate for 30-year fixed-rate mortgages with a conforming loan balance increased to 4.23% from 4.20% with points decreasing to 0.32 from 0.37.

For the week, the FNMA 3.5% coupon bond dropped 20.3 basis points to close at $102.594 while the 10-year Treasury yield increased 6.13 basis points to end at 2.35%.  Stocks ended the week modestly higher.  The Dow Jones Industrial Average rose 66.43 points to end at 21,006.94.  The NASDAQ Composite Index advanced 53.15 points to close at 6,100.76 and the S&P 500 Index added 15.09 points to close at 2,399.29.  Year to date, the Dow Jones Industrial Average has gained 6.30%, the NASDAQ Composite Index has advanced 13.33%, and the S&P 500 Index has risen 7.17%.

This past week, the national average 30-year mortgage rate held steady at 4.09%; the 15-year mortgage rate was unchanged at 3.34%; the 5/1 ARM mortgage rate was unchanged at 3.08%; and the FHA 30-year rate increased to 3.85% from 3.80%.  Jumbo 30-year rates rose from 4.35% to 4.36%.

Mortgage Rate Forecast with Chart - FNMA 30-Year 3.5% Coupon Bond

The FNMA 30-year 3.5% coupon bond ($102.59, -20.3 bp) traded within a 53 basis point range between a weekly intraday high of $102.89 on Wednesday and a weekly intraday low of $102.36 on Thursday and Friday before closing the week at $102.59.  Mortgage bonds ran into what proved to be a solid line of resistance at the 38.2% Fibonacci retracement level at $102.81 on Monday through Wednesday before moving below support provided by the 25-day moving average on Thursday.  The bond then reacted to the employment report on Friday with an increase in volatility before settling higher to form a small bullish engulfing lines candle pattern which is a positive finding.  However, the slow stochastic oscillator shows a drop in momentum as it trends lower toward the “oversold” line.  These conflicting technical signals suggest the bond could trade sideways between support and resistance levels this coming week, and should this happen mortgage rates ought to hold steady with little change.

Susan Turner Mortgage - in 1860 What Happened in the FINANCIAL market that impacts us today? Great reading

Cashin's Corner - 4/4/2017

April

04

2017

On this  day (-1) in 1860, a group of entrepreneurs  launched their dream. And what a dream it was! They were in the telecommunications business. The nation was suddenly  bi-coastal.   At both oceans America was thriving. And these guys knew that communications was the key to the future.

 

So, on this day, the first Pony Express rider left St. Joseph, Mo. on his leg of the 1966 mile route to Sacramento  California.   The  cost was  $5 per 1/2 ounce (it was later cut to a buck).  Tendays later the mail arrived in the Golden State (to the amazement of nearly everyone).

 

They promoted the service well-very well.  The image of a rider fighting off storms, Indians and various animals while rushing your mail was an instant hit.   It  was a depiction of pioneer life like none before or after.   America bought it then and bought it now.   The Pony Express thrives to this day in image and movie retelling as the epitome of American survival.

 

Even their recruiting posters smacked of the romance and risk inherent in the endeavor.  One example read:  "Wanted:  Young, skinny,  wiry fellows  not over 18.    Must  be  expert riders  willing  to  risk  death  daily.    Orphans preferred."

 

Unfortunately, while it sold  as an image, it failed to sell as a service.   While the image has lasted nearly a century and a half as a national standard the company lasted only 18 months as a business.

 

Even though the Pony  Express used tried and true methods that had been used by Ben Franklin almost 100 years before (and by Darius of Persia nearly 2,000 years before that), the situation failed.  What they missed in their calculations was something called the telegraph.  So in less than 18 months they were out of business.

 

To celebrate invite someone who doesn't look like Ben Franklin to play "PonyExpress" - - It's a lot like Post Office only there's more horsing around.

 

Monday's  market didn't  see a lot of horsing  around but it did see several swings, some on less than usual influences.

 

Cars, Loans And Then Politics Weigh On Morning Action But Dip Buyers Pare Losses Smartly – As the second quarter of 2017 began,  U.S. stocks opened mixed.

 

That seemed  logical, at least on the surface,  as  European  markets  were mixed in lighttrading; crude was unchanged and corporate news was inconclusive.

 

Shortly after the opening, auto sales came in a bit light.  That seemed to reignite very recent concerns on auto loan delinquencies and plunging used car prices.

 

Automakers and auto-related stocks come under real pressure. CarMax fell over 4%.

 

 

That selling seemed to spread through the consumer discretionary area. The selling was broad and persistent but not heavy.

 

About 90 minutes into the game, some political buzz began to build into the backdrop  as various pundits laid out the week ahead in Washington.

 

I alluded  to that in a late morning email to some friends:

 

 

Calendar might have suggested a mild bid under stocks (new money for a new month).

 

Instead, the calendar that they seem to focus on is the Washington calendar, chock full of chances for the new team to shoot themselves in the foot multiple times.  Hedging that possibility means reducing exposure (equities also hurt by Europe and crude to a very mild degree – above $50 okay).

 

Same thesis in bonds as an agenda blow-up or very lengthy delay could trim the Fed to one more for this year at best.

 

I got some feedback from skeptics saying things like – "Are you trying to tell me that the stock market cares that much about Judge Gorsuch?"

 

 

With all due respect to the good judge, it is not he or any single action that the market cares about.  It is whether the Republicans,  with  theoretical control of  the House,  the Senate and the White House will nevertheless fumble away the agenda.

 

Recall the post-election rally.  It  was built on hopes  of deregulation, tax reform and maybe even a big physical stimulus program.

 

 

Those hopes raised stocks, confidence indices and hopes for some momentum in the economy.

 

 

Then the Republicans fumbled even a draft bill on Obamacare despite the President's active participation. The stock market was not happy and doubts grew on the agenda. Can't anybody here play this game?

 

 

Around noon, Mr. Trump showed up in front of the cameras with Egypt's President Mr. Al sisi.  He gave things a political thumbs up and said he and Mr. Al-sisi were BFF.  Gee, the event went as hoped.

 

 

Defensive selling stopped and stocks floated a bit higher, taking stocks off their lows.

 

 

The Egyptian meeting was not a cure all but it went well. Maybe every ball is not fumbled. With the selling stalled, the buy the dip crowd began to nibble. At first, the buying was rather passive and then after 2:15, the scarcity factor seemed to kick in and the same mild buying began to move prices a bit higher.

 

 

Stocks ended the day with minor losses.  The consumer discretionary sector took the largest hit with finanicals also getting dinged. Healthcare and telecoms were best performers.  Declines edged out advances 16 to 13. Volume was higher than recent averages. A bit of an apprehensive Monday.

 

Overnight And Overseas – China, Hong Kong and India are on holiday. Japan sold off on concerns about the yen and auto sales.  Financials dragged down Australia.

 

 

European markets are mixed and a bit nervous (Russian terror and Washington week?).  Some flight to safety puts bid under bonds and bunds. Gold sees a mild bid. Crude holds.

 

 

Consensus – We think Washington will remain center stage all week. The question is can the Republicans get things done or is the "agenda" dead?

 

 

Stick with the drill – stay wary, alert and very, very nimble.

 

 

Trivia Corner

 

 

Answer - The nine U.S. Presidents who never attended college were: Washington; Jackson, Van Buren; Taylor; Fillmore; Lincoln; Johnson; Cleveland; and Truman.

 

Today's Question - David can mow all the grass on his pal Jack's property in 7 1/2 hours.  Jack's nephew Alfie can do it in 5 hours.  Assuming there were two mowers, how long would it take the two working together?

Susan Turner Mortgage presents the RULE of 72 - double your money

The Rule of 72


Here's how to do compound interest calculations in your head. The "Rule of 72" says that to find the number of years required to double your money at a given interest rate, you just divide the interest rate into 72. For example, if you want to know how long it will take to double your money at eight percent interest, divide 8 into 72 and get 9 years. 

 

Lump sum to invest$

  

Plus monthly savings of$

  

Return, net of tax%

  

Invested for years

  

Value of your investments

Susan Turner mortgage - Market UPDATE for Monday 4-3-17

Market Wrap - 4/3/2017

Monday…

Stocks ended the day mixed. The Dow closed 7.57 at 20,670.79 and the S&P closed -3.88 at 2,358.84.  Mortgage Bonds began the day slightly higher and rallied into the close, finishing up 38bp. 

One of the focuses of this week will be the Fed.  There were several Fed speakers last week and one of the things that they talked about was their balance sheet – they have $4 Trillion they are holding, 1.7 Trillion of which is Mortgage Backed Securities.  They want to eventually let this run off.  They would like to get the Mortgage portion off their balance sheet first and if they allow them to run off or sell them, it could be very disruptive because the Fed is still buying 4-7B per week on average from reinvestments.  This has been supporting Mortgage Bonds and if they decide to stop doing this, it takes a big buyer out of the market.

We did receive some manufacturing data from the ISM and PMI, both slightly lower than last month’s reading and in line with estimates.

Economic Data

ISM Manufacturing Index: Actual = 57.2; Consensus = 57.1 Prior = 57.7

PMI Manufacturing Index: Actual = 53.3; Prior = 54.2

Upcoming Events

It’s Jobs Week and the action heats up on Wednesday with the ADP Employment Report and Friday with the BLS Jobs Reports.  The market is expecting between 170-180 job creations in each report.  We will also get the Fed Minutes from the 3/15 Fed Meeting, which will give us a closer look into the Fed’s thought process for hiking. 

Technical Picture

As we had said in this morning’s update, Mortgage Bonds had room to run after breaking above the 100-day Moving Average on Friday…and that’s just what they did.  They are now only 10bp beneath the next level of resistance at 102.81.  The 10-year Treasury Note Yield made a significant move, breaking beneath the 2.385% level.  Yields are currently trading at 2.32%, just above the 2.31% level we are watching closely.  The last few times Yields tested this level they were pushed much higher…but if they are able to break beneath 2.31%, the can move down to 2.18%. 

Position

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