Morning Report - Construction Spending falls

Vital Statistics:

	Last	Change	Percent
S&P Futures	1950.2	-15.3	-0.78%
Eurostoxx Index	3192.3	-33.7	-1.04%
Oil (WTI)	92.28	1.1	1.23%
LIBOR	0.235	0.002	0.86%
US Dollar Index (DXY)	85.94	0.008	0.01%
10 Year Govt Bond Yield	2.42%	-0.07%
Current Coupon Ginnie Mae TBA	106.4	0.2
Current Coupon Fannie Mae TBA	105.7	0.3
BankRate 30 Year Fixed Rate Mortgage	4.12

Markets are lower this morning on Euro-area weakness. Bonds and MBS are rallying.

Mortgage Applications fell .2% last week, according to the MBA. Purchases were flat, while refis dropped .3%. Contract interest rates for the 30 year fixed rate mortgage fell from 4.39% to 4.33%.

Construction spending fell .8% month-over-month in August, and is up 5% year-over-year. Private resi was down .1%, while non-residential was down 1.2%.

The ADP Employment change is predicting 213k private sector jobs for this Friday's jobs report. The Street is at 210k.

The ISM Manufacturing Index fell from 59 to 56.5, while prices paid rose from 58 to 59.5.

Fannie Mae investors lost a court ruling that threw out two lawsuits regarding Fannie's profits, which go 100% to the government. The stock is down a buck (or about 38%) on the open. It traded as low as 97 cents pre-open. The stock is more or less a litigation lottery ticket, and this Administration is bound and determined to see to it that shareholders are wiped out.

The CFPB slapped down Flagstar in its first servicing enforcement. They were fined $27.5 million and given a tongue-lashing by Cordray. Their sin was was failure to devote sufficient resources to administering loss mitigation programs for distressed borrowers. Note that if Republicans take the Senate, one of the first orders of business will be to introduce legislation to tame the CFPB.

Epic "fat finger" trade on the TSE last night - $617 billion worth of orders were voided after a data error caused someone tried to trade 57% of the float in Toyota.

The Fed is worried about leveraged loans. Excessively low interest rates have the unintended consequence of encouraging investors to reach for risk in order to hit return targets. I have been saying for some time that the stock market is assigning a 100% probability that the Fed can start hiking rates without someone blowing up.