| Last | Change | Percent | |
| S&P Futures | 2117.9 | -6.7 | -0.32% |
| Eurostoxx Index | 3649.2 | -6.3 | -0.17% |
| Oil (WTI) | 58.59 | -1.1 | -1.89% |
| LIBOR | 0.285 | 0.003 | 0.89% |
| US Dollar Index (DXY) | 97.09 | 1.073 | 1.12% |
| 10 Year Govt Bond Yield | 2.20% | -0.01% | |
| Current Coupon Ginnie Mae TBA | 101.8 | 0.1 | |
| Current Coupon Fannie Mae TBA | 100.8 | 0.0 | |
| BankRate 30 Year Fixed Rate Mortgage | 3.9 |
Stocks are down after Spanish elections over the weekend showed a move to the left. Euro bond yields are again going different directions, with the Greek, Spanish, and Portuguese bond yields increasing, and the Northern European yields falling. US Treasuries are getting pushed lower as well.
We have a ton of economic data this morning. Durable Goods fell 0.5% in April, however when you strip out defense and transportation, they were up 0.8% and March's -0.4% reading was revised upward to 1.0%. Capital Goods ex defense and transportation is considered to be a proxy for business capital expenditures, which has been more or less in maintenance mode since the financial crisis. We would need to see numbers around +1.5% - +2.0% to say that business is beginning to build out for expansion.
New Home Sales rose to 517k from 484k in April. Given the strong housing starts numbers last week (highest since November 2007), we might be seeing a decent 2015 after all for the homebuilders and the real estate sector in general. Given the persistent shortage of available real estate (NAR has it at 5.4 months), I find it surprising it has taken this long.
Home Prices continue to rise, according to Case-Shiller and the FHFA House Price Index. The FHFA index is up .3% in March and up 1.3% for the first quarter. This index is now within a couple percentage points of the January 2006 peak. The Case-Shiller index is up 0.95% for March and up 5% annually. The big gainers were San Francisco (up double digits again) and Denver. I suspect there is a lot of foreign money looking for a home in the big cities and that is affecting the Case-Shiller indices. The FHFA Index is narrower than Case-Shiller - it only looks at houses with a conforming mortgage, so it excludes a lot of the high end and the low end of the real estate market.
Consumer confidence rose to 95.4 in May, up slightly from April, but still below the Jan peak of 103.8. The Richmond Fed Index rose slightly, and Markit is forecasting a slight downturn in the PMI indices.
It is looking more and more like Greece is going to miss its payment to the IMF next week, unless they get more bailout funds. Here is a good FAQ of what can happen. I suspect the IMF and the ECB will come up with a way to kick the can down the road. Greek Banks are a hot mess (much of their capital consists of deferred tax assets and Greek sovereign debt) and they are completely dependent on emergency loan agreements from the ECB. If the government defaults on IMF payments, the ECB could declare the collateral backing these loans as ineligible (which makes sense since they are more or less defaulted securities), which would make the Greek banks insolvent and set the stage for a bank run. The big European banks all have at least some exposure to Greece and that will certainly be a consideration for the ECB. Public opinion supports keeping Greece in the EU so I suspect they will find a way. However if they do miss their payment and things take a turn for the worse, it is probably dollar (and bond) bullish.
Interesting article about how the Fed has consistently overshot its economic forecasts for the US economy. The market however continues to disagree with the Fed, and it has been right. Take a look at the chart below. The Fed makes new economic forecasts quarterly, and I have tracked the Fed's forecast for 2015 GDP since the March 2013 FOMC meeting. As you can see, two years ago, they thought 2015 GDP would come in around 3.3%. They are now forecasting 2%. Given that the Street is forecasting that the second revision to Q1 GDP is going to come in at -0.9% (we'll get that number Friday), they will probably end up taking down their forecast at the June meeting. People are starting to think the next rate hike will be a 2016 event.
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