Morning Report: retail sales rise

Vital Statistics:

	Last	Change	Percent
S&P Futures	2081.0	-3.2	-0.15%
Eurostoxx Index	3535.7	51.3	1.47%
Oil (WTI)	42.87	-0.4	-0.99%
LIBOR	0.314	0.000	0.05%
US Dollar Index (DXY)	96.66	0.399	0.41%
10 Year Govt Bond Yield	2.17%	0.03%
Current Coupon Ginnie Mae TBA	104.5	0.0
Current Coupon Fannie Mae TBA	103.7	0.0
BankRate 30 Year Fixed Rate Mortgage	3.83

Markets are flattish on no real news. Bonds and MBS are down.

Retail Sales rose 0.6% in July, in line with expectations. The control group, which strips out volatile items like autos, gasoline and building products rose 0.3%, below expectations. It looks like people are spending shifting spending from goods to services (ie restaurants). August's sales will be important - it signifies back-to-school shopping, which is a good predictor of holiday sales. 

Mortgage foreclosures fell to 2.09% in the second quarter from 2.22% in the first. Delinquencies fell from 5.54% to 5.3%. 

Import prices fell 0.9% in July, a little less than expectations. Inflation remains nowhere to be found. 

Initial Jobless Claims continue to hang around 4 decade lows. They rose slightly to 274k. 

The Bloomberg Consumer Comfort index ticked up slightly to 40.7 from 40.3. Sentiment remains soggy.

As we head into the September FOMC meeting, here is a dovish take on why the Fed should maintain ZIRP. His point is that the withdrawal of QE has already softened the economy and interest rates reflect the new normal of weak global growth and no inflation. Increasing rates risks tipping the economy back into a recession. While I am somewhat sympathetic to his argument, I doubt that 25 basis points on the Fed Funds rate is going to have that big of an impact, and the Fed will go slow. Janet's Addiction dies hard. 

The rent versus buy decision is getting easier. While home prices continue to rise, rents are rising faster as vacancy rates fall. In expensive places like LA, people are spending half their income on rent. Something to point out to first time buyers who are on the fence: Buy a home and get a 30 year fixed rate mortgage, and your principal and interest payment won't increase, ever. Beats the heck out the annual negotiation with the landlord.