Morning Report: ADP payrolls come in light

Vital Statistics:

	Last	Change
S&P Futures	2583.0	10.0
Eurostoxx Index	397.8	2.5
Oil (WTI)	55.0	0.6
US dollar index	87.8	0.1
10 Year Govt Bond Yield	2.39%
Current Coupon Fannie Mae TBA	102.68
Current Coupon Ginnie Mae TBA	103.75
30 Year Fixed Rate Mortgage	3.99

Green on the screen this morning as markets rally worldwide. Bonds and MBS are down. 

The Fed decision is due at 2:00 pm EST today. No changes in interest rates are expected, but there is always the risk that something in the statement could move rates. Be careful locking around then. Separately, Donald Trump is scheduled to announce Yellen's replacement tomorrow. 

Mortgage applications continue to fall (six times in the last seven weeks), according to the MBA. Applications decreased by 2.6% as purchases fell 1% and refis fell 5%. Mortgage rates hit a low for 2017 in September, but have risen about 20 basis points since then. The average contract interest rate was 4.22%, an increase of 4 basis points from last week. 

ADP saw an uptick in payrolls for October, increasing to 235k. September was revised downward to 110k due to the hurricanes. Many were expecting to see a bigger rebound for October, but it hasn't happened, at least according to ADP. The BLS is announcing payrolls on Friday, with the Street looking for 325k. 

Construction spending rose 0.3% in September, according to the Census Bureau. On a YOY basis, it is up 2%. Residential construction was flat on a month-over-month basis but is up 9.6% YOY. 

Manufacturing is still strong, according to the ISM index. It slipped slightly in October to 58.7 from 59.5. Hurricane effects are probably having some effect here. 

House Republicans moved back their tax reform reveal by a day, which shows there is some disagreement in whether this can pass. With uniform opposition from Democrats, it will only take a few Republicans to kill it. The state and local tax deduction will probably prove to be the deal killer, and while many Republicans have big philosophical objections to the estate tax, it probably isn't a hill worth dying on. While people have historically considered senior citizens to be the third rail of politics, in all reality, it is the upper middle class (especially the HENRY's, which stands for high earnings, not rich yet). They are the ones most affected by changes in 401k contributions, state and local tax deductions, and the mortgage interest deduction. The top 20% pays 95% of the income taxes in this country, according to OMB.