Morning Report: QE (Infinity)

Vital Statistics:

	Last	Change	Percent
S&P Futures	1411.8	5.0	0.36%
Eurostoxx Index	2489.5	11.6	0.47%
Oil (WTI)	86.67	0.0	0.00%
LIBOR	0.314	-0.001	-0.32%
US Dollar Index (DXY)	80.02	0.041	0.05%
10 Year Govt Bond Yield	1.77%	0.01%
RPX Composite Real Estate Index	194.1	0.3

Stock index futures are stronger this morning after yesterday's rout. Dow Chemical reported better than expected earnings in spite of a leaked memo that said the company was considering laying off 5% of its workforce. Facebook surprised to the upside by cracking the code on monetizing mobile. Mortgage aps dropped 12% last week.  The Markit PMI (a predictor of the the ISM PMI) came in light, but still improved from Sep. Bonds and MBS are down small.

The FOMC rate decision is scheduled for 2:15 EST.  Historically the Fed has tried to stay out of the way this close to the election - in fact, the last announcement on QE (Infinity) was pushing it.  Which means the smart bet is going to be that this is a non-event.  That said, the Street is expecting some change - where the Fed adds Treasuries to its QE mix - so there is the possibility of market movement, especially MBS versus Treasuries. I wouldn't want to be floating going into that announcement.

The FHFA House Price Index rose .7% in August, and is up 4.7% YOY.  This index covers only conforming mortgages, so it is less noisy than Case-Schiller or Radar Logic.

Freddie Mac's latest US Economic and Housing Market Outlook expects QEIII to spark a further pick-up in housing activity, noting that housing has turned from a headwind to a tailwind for the economy. They are forecasting $2 trillion in originations this year, followed by a 15-20 percent contraction in 2013 as the refi boom plays out. They do worry about the fiscal cliff taking 2 percentage points out of GDP, although Obama is playing cat and mouse with the defense budget cuts, as he says one thing in the debates "cuts will not happen" and his advisers walk back the comments afterward. Elmer Fudd is quite concerned about the fiscal cliff as well.

Finally, Rob Chrisman gives you the data dump from the MBA Conference in Chicago.  Originators are adding capacity, the CFPB wants a flat fee for all mortgage originations, and the Street gets ticked when clients have the gall to check multiple dealers in order to get the best price on their TBA transactions.