Morning Report: Dismal economic numbers this morning

Vital Statistics:

	Last	Change	Percent
S&P Futures	1896.6	-11.9	-0.62%
Eurostoxx Index	2882.8	-13.8	-0.48%
Oil (WTI)	32.15	-0.1	-0.40%
LIBOR	0.619	0.001	0.10%
US Dollar Index (DXY)	96.44	-0.850	-0.87%
10 Year Govt Bond Yield	1.87%	-0.02%
Current Coupon Ginnie Mae TBA	105.3
Current Coupon Fannie Mae TBA	104.7
BankRate 30 Year Fixed Rate Mortgage	3.69

Stocks are lower this morning after we got some disappointing economic data. Bonds and MBS are up small.

Dismal economic numbers all around this morning

Productivity fell 3% in the fourth quarter and unit labor costs rose 4.5%. This is a recipe for falling profits in 2016. Given the tepid GDP growth being forecast for next year (sub 2%), companies will focus most on cost-cutting. Given the excess capacity in the manufacturing economy, companies have been reluctant to spend on capital expenditures, which has depressed productivity. Definitely not a recipe for releasing the animal spirits, although if builders start to address the tight supply, it will provide a good boost for the economy. 

Factory orders fell 2.9% in December, which was below the Street estimate. November's numbers were revised downward as well. 

Durable Goods orders fell 5% in December as well. Capital Goods orders (a proxy for capital expenditures by business) fell by 5%. This directly relates to the lousy productivity numbers above. 

Announced job cuts increased 41.6%, to over 75,000 according to outplacement firm Challenger and Gray. Most of the cuts are coming in retail and energy.  

Initial Jobless Claims rose 285k last week. 

The Bloomberg Consumer Comfort Index fell from 44.6 to 44.2 last week. 

Don't underestimate the Fed, which is the message from major strategists. Goldman Sachs Chief Economist Jan Hatzius is calling for a 3% 10 year by the end of the year. 

On the other hand, mortgage REIT American Capital Agency is calling for the Fed to abandon its "tightening bias" by the end of 2016. They see a hard landing in China, continued weakness in emerging markets, and undervalued Treasuries versus other benchmark sovereigns. 

In a testament to the change occurring in the financial markets, lenders like Quicken and SoFi will be advertising during the Super Bowl this year. 

Both Republicans and Democrats agree the economy is lousy, and both sides are going back to their boilerplate explanations. Democrats blame Wall Street and the rich, while Republicans blame government. The funny thing is that the "Wall Street" they rail against hasn't existed for almost 10 years.