Morning Report - Big surprise on Q1 GDP

Vital Statistics:

	Last	Change	Percent
S&P Futures	1870.8	-1.0	-0.05%
Eurostoxx Index	3196.3	-12.4	-0.39%
Oil (WTI)	100.3	-1.0	-1.01%
LIBOR	0.223	-0.002	-0.89%
US Dollar Index (DXY)	79.59	-0.221	-0.28%
10 Year Govt Bond Yield	2.69%	0.00%
Current Coupon Ginnie Mae TBA	105.6	0.1
Current Coupon Fannie Mae TBA	104.5	0.0
BankRate 30 Year Fixed Rate Mortgage	4.3

Markets are slightly lower this morning after GDP came in much, much lower than expected. Bonds and MBS are up small. The market almost does not believe the number.

The advance estimate for first quarter GDP came in at +.1%. The Street was looking for +1.2%, so this is a big surprise. Remember, this is the advance estimate for first quarter GDP and will be subject to two revisions. Given the fact that the SPUS aren't down 20 handles and the 10 year isn't yielding 2.6%, the Street clearly thinks this will be revised substantially upward the next time around. Going from 2.6% growth in Q4 to nearly flat GDP growth simply doesn't comport with all the other numbers we have been getting.

Mortgage Applications fell 5.9% last week. The index is challenging the lows we set in the last week of 2013. The refi index has already broken through that low and is now around the lows set in mid 2008. Purchases fell 4.4%, even though rates were flat. Average loan sizes fell to 239.7k and the refis account for just over half of all applications right now. 

The ADP Employment report is forecasting 220k private payrolls for Friday's jobs report. Last month, the ADP number pretty much nailed it. The Street is forecasting 215k this Friday. 

We had some other minor data this morning, with the ISM Milwaukee missing estimates and the Chicago Purchasing Manger's index beating.

We will hear from the FOMC later today. Given there will be no press conference, I think we should expect nothing major, just another $10 billion in tapering and a commitment to lower rates until the labor market improves. I will be interested to see if the statement references the slowdown in Q1. 

The Senate Banking Committee has enough votes to get Johnson Crapo out of Committee, but not enough to bring it to the floor. Six Democrats and six Republicans out of 22 support the measure. The liberals want more effort spent on forcing banks to lend to "underserved" areas, and increases in housing subsidies in general, especially affordable housing.