Morning Report - Bank earnings and mortgage origination

Vital Statistics:

	Last	Change	Percent
S&P Futures	1875.9	10.3	0.55%
Eurostoxx Index	2987.6	-10.7	-0.36%
Oil (WTI)	84.91	-0.8	-0.97%
LIBOR	0.23	0.001	0.39%
US Dollar Index (DXY)	85.76	0.232	0.27%
10 Year Govt Bond Yield	2.20%	-0.08%
Current Coupon Ginnie Mae TBA	106.7	-0.1
Current Coupon Fannie Mae TBA	106.2	0.2
BankRate 30 Year Fixed Rate Mortgage	4.15

Stocks are higher this morning as bank earnings come in generally good. Bonds are flying on European weakness, and the 10 year hit an intraday low of 2.175 as Germany cut their 2014 - 2015 growth forecast by a pretty sizeable amount. 

We had earnings from some big banks this morning. Citi and Wells beat numbers, while JP Morgan missed.  On the origination side, Wells reported an $48 billion in originations, an increase of a billion from the previous quarter. Gain on sale margins increased from 1.41% to 1.82%. JP Morgan announced the bank had gained market share in mortgages, however they cut 6,000 jobs in the space and will probably cut another 1,000. For JP Morgan, originations were 21.2 billion, down 48% from a year ago, but up 26% quarter-over-quarter.

The NFIB Small Business Optimism Survey came in at 95.3, a drop from the prior month and below expectations. On the plus side, firms added .24 workers on average during the month. On the downside, only 22% of owners expect to make capital expenditures over the next 3 to 6 months. They note that the Fed has indicated it will raise rates in 2015, however the Fed's forecasts for GDP have been over-optimistic. Take a look at the chart below. This is the Fed's forecast for 2014 GDP growth starting at the December 2012 FOMC meeting and continuing through the September 2014 meeting. You can see how they have consistently cut their forecast. 

Speaking of GDP growth, consumption is the biggest driver. It is looking like the holiday shopping season could be weak, with PriceWaterhouseCoopers predicting average holiday spending per household will fall to $684 this year from $735 in 2013. The National Retail Federation is more optimistic, predicting growth of 4.1%. Blame rising healthcare, childcare, and housing costs versus a backdrop of stagnant wages. Offsetting that of course is energy, with oil slipping below $85 a barrel. FWIW, the Back-To-School shopping season was meh, which is usually a good predictor of holiday sales.