| Last | Change | Percent | |
| S&P Futures | 2107.7 | -0.2 | -0.01% |
| Eurostoxx Index | 3639.5 | 3.9 | 0.11% |
| Oil (WTI) | 49.52 | 0.3 | 0.67% |
| LIBOR | 0.294 | -0.001 | -0.31% |
| US Dollar Index (DXY) | 97.25 | -0.346 | -0.35% |
| 10 Year Govt Bond Yield | 2.34% | 0.02% | |
| Current Coupon Ginnie Mae TBA | 104 | 0.0 | |
| Current Coupon Fannie Mae TBA | 103.2 | 0.0 | |
| BankRate 30 Year Fixed Rate Mortgage | 4.14 |
Markets are flattish as earnings reports continue to pile in. Bonds and MBS are flat.
Initial Jobless Claims fell to 255k last week, the lowest level since 1973. People that have jobs are keeping them, unfilled jobs are at the highest level since the boom days of 2000, people that work part time and want to work full time can't find jobs, and the labor force participation rate is at almost 40 year lows. What is wrong with this picture? A massive mismatch between the skills employers want and the the skills the unemployed actually have. This is evident in the real estate sector, where skilled construction labor is in a dire shortage.
The Conference Board's Index of Leading Economic Indicators came in much better than expectations, at +0.6% versus expectations of +0.3%. May was revised upward to +0.8%. Housing related indicators are finally driving the index higher, which is primarily a result of the big increases in building permits we have seen over the past two months. Labor continues to be the drag on the index.
In other economic data, The Chicago Fed National Activity Index rose to .08 in June from -.08 in May. Production and employment indicators drove the increase. The Bloomberg Consumer Comfort Index fell slightly last week.
The Greek Parliament approved the austerity package Tsipras and Europe was asking for. The ECB extended its emergency liquidity package by something like 900 million euros. I guess Greece is going to be out of the headlines for a while.
The other major international economic story - the meltdown in Chinese stocks - seems to have been arrested as well as state funds have been supporting the market. The Chinese have taken a page from the Japanese Ministry of Finance and have decided to try the old "use state funds and moral suasion to force buying and stop selling" in order to hold up the market. Japan did this in the late 90s (they were called Price Keeping Operations) and tried to prevent the market from falling below 13,000 in order to protect the banks. Eventually the market won and the Nikkei eventually fell below 7,000. I suspect China will see the same fate, but this will be a titanic battle of wills between Big Communist Government and Mr. Market. So far, Mr. Market has an undefeated record.
Between the strong labor data, and the fading of international worries, worries about a September liftoff will move to the forefront again. Low commodity prices are giving the Fed an excuse not to move, but they are probably behind the curve at this point. Inflation is great for debtors (or at least people who owe money at a fixed rate) but is bad for creditors. Note the biggest creditor out there is the Fed, who owns about 4.5 trillion of US Treasuries and mortgage backed securities.
New York State is going all-in on the minimum wage experiment - $15 an hour (or 31k a year plus benefits) for even 16 year old fast food workers. Note this isn't New York City, where they might be able to get away with it, but New York State. The difference in the cost of living between, say Syracuse and Manhattan is night and day. The high priest of progressive economics, Paul Krugman seems to think the laws of supply and demand don't apply to the labor market, so we will see how this plays out. IMO, the most obvious changes will be to cut teenagers out of the labor force entirely, and companies will continue to substitute technology for labor. Not sure how the left intends to deal with the technology issue - they probably imagine they can tax (or regulate) it away. What we do know is that if the left's meddling in the labor market doesn't give them the results they had hoped for, they will blame laissez-faire economics and the free market.
Speaking of the left, NYC Mayor DeBlinkins decided to back off from going after Uber. Progressive ideology aside, it is a bear to get a cab on the Upper East Side.
Homebuilder PulteGroup reported earnings that beat the street but revenues missed. Pulte said their first time buyer segment was showing "good results." Pulte also intends to accelerate land spending in the second half of the year, which signals further that they plan to push through volume as it is getting harder to increase prices, especially at the low end. Pulte (as opposed to companies like Toll and Lennar) has exposure to the lagging portions of the housing sector - the Midwest, the Northeast, and the first time homebuyer.
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