Morning Report - On the waterfront

Vital Statistics:

	Last	Change	Percent
S&P Futures	2093.6	-2.3	-0.11%
Eurostoxx Index	3459.2	20.8	0.60%
Oil (WTI)	52.39	-1.1	-2.13%
LIBOR	0.256	-0.001	-0.35%
US Dollar Index (DXY)	94.28	0.223	0.24%
10 Year Govt Bond Yield	2.12%	-0.02%
Current Coupon Ginnie Mae TBA	101.8	0.1
Current Coupon Fannie Mae TBA	101.1	0.0
BankRate 30 Year Fixed Rate Mortgage	3.83

Markets are lower as Greece seeks to limit some of the reforms being demanded from other Euro area members as a condition to extending the country's 240 billion euro rescue package past February. Bonds and MBS are up small.

Mortgage Applications fell 13.2% last week as purchases fell 7.1% and refis fell 16%. It looks like mortgage rates didn't move tremendously, at least according to the Bankrate 30 year fixed rate mortgage numbers. Mortgage rates had lagged the move downward in the 10 year, so it is unsurprising they are lagged the move back up. It appears they are beginning to move up with bond yields this week, however.

Housing starts fell 2% in January to an annualized pace of 1.065 million units. Building permits fell .7% to an annualized pace of 1.053 million. 

Inflation remains muted at the wholesale level, with the Producer Price Index falling .8% month-over-month. Stripping out food and energy, it fell .1%, month over month, and increased 1.6% year over year. 

Industrial Production rose .2% in January, and capacity utilization fell from 79.7% to 79.4%. 

Speaking of inflation, there is a labor dispute between the longshoremen and the ports on the West Coast. We are starting to see some stirrings from labor unions, which could mean we are finally seeing the start of wage inflation. That said, the two labor unions involved are in industries which are in the middle of dramatic change. Ports are becoming more and more automated, and quite frankly do not need as many workers as they used to. The longshoreman are simply trying to delay the inevitable and are fighting over work rules that require two people supervise an automated crane. The steelworkers decided to pick a fight just as oil prices are falling and a labor surplus in the oil patch is being generated. Neither side has much in the way of negotiating leverage. That said, it will be interesting to see if they win. 

Another data point for the energy patch: Buffett sold all of his Exxon Mobil and ConocoPhillips. 

The minutes from the last Fed meeting should be released around 2:00 pm EST, so there is a chance for some bond market volatility around that time. 

While it seems like Democrats and Republicans are in a death match struggle over the direction of this country and the days of genteel civility are in the past, here is some perspective. Turkey's President Recep Tayyip Erdogan has filed a lawsuit against the head of Turkey’s central bank, Erdem Basci, charging him with mismanaging the country's interest rate policy and not lowering rates as demanded by the government. He faces two years in jail.