Morning Report: Home purchase sentiment the lowest in 18 months

Vital Statistics:

	Last	Change	Percent
S&P Futures	2051.0	10.3	0.50%
Eurostoxx Index	2936.0	24.1	0.83%
Oil (WTI)	40.06	0.3	0.86%
LIBOR	0.631	0.002	0.32%
US Dollar Index (DXY)	93.99	-0.246	-0.26%
10 Year Govt Bond Yield	1.74%	0.03%
Current Coupon Ginnie Mae TBA	105.6
Current Coupon Fannie Mae TBA	105
BankRate 30 Year Fixed Rate Mortgage	3.63

Markets are higher this morning on no real news. Bonds and MBS are lower

No economic data today - in fact this week looks pretty data-light. We will get retail sales, inflation and industrial production data this week, but none of these should be market moving, unless inflation comes in way higher than expected. The Fed doesn't really pay too much attention to the CPI and PPI numbers.

Earnings season kicks off this week in the traditional way, with Alcoa reporting after the close. The first week is usually pretty slow, and dominated by the banks. JP Morgan and Citi report Wednesday and Friday, respectively. The banks are being squeezed by a flattening yield curve as the Fed is tightening while long-term rates are falling. This compresses net interest margins and cuts profits. The stock market has been hitting the financials lately, which you can see below with a relative performance graph of the S&P SPDRs versus the XLF financials ETF

Consumer home purchase sentiment is the lowest in 18 months, according to Fannie Mae. Pessimism over the economy is spilling over into the real estate market. They haven't been this pessimistic about the economy since March of 2014.

Want to hear something depressing? Check this out: Hillary's take on the banking industry...(feel free to ignore the commentator) She thinks lending discrimination is rampant in our industry, which is a preposterous assertion in the age of automated underwriting systems. The ironic thing is that if the government was on a mission to restrict credit to poor people, push mortgage origination to the biggest TBTF banks, and depress the economy, they would be doing exactly what they are doing. Worse, they don't even realize it.

Following on that theme, Wells just settled with the DOJ for $1.2 billion over errors in its FHA loans from 2001 to 2008. According to the settlement, Wells Fargo "admits, acknowledges, and accepts responsibility" for having from 2001 to 2008 falsely certified that many of its home loans qualified for Federal Housing Administration insurance. Wonder if Wells is going to follow JP Morgan in de-emphasizing FHA loans.