Morning Report: Inflation is picking up

Vital Statistics:

	Last	Change
S&P Futures	2577.0	-5.0
Eurostoxx Index	384.4	-1.8
Oil (WTI)	56.5	-0.3
US dollar index	87.5	0.0
10 Year Govt Bond Yield	2.39%
Current Coupon Fannie Mae TBA	102.875
Current Coupon Ginnie Mae TBA	103.938
30 Year Fixed Rate Mortgage	3.87

Stocks are lower on overseas weakness. Bonds and MBS are flat.

Inflation at the wholesale level picked up in October, according to the Producer Price Index. The headline number rose 0.4% MOM and 2.8% YOY on services inflation, which is being driven (hopefully) by increased compensation. The core rate was up 0.2% MOM and 2.3% YOY. 

Small business optimism picked up in October on strong labor readings. The average firm added .17 workers, while job openings stayed in record territory. In fact, the inability to find qualified workers was the second biggest headache for small business. As an aside, I wonder if this is an inability to find qualified workers, or an inability to find qualified workers who can pass a drug test. A net 27% of firms reported increasing compensation. 

People are spending money on their homes. The Despot reported strong Q3 earnings with comparable store sales up 7.9%, despite the hurricanes. I guess when inventory is as low as it is, people will remodel their current home instead of moving. 203ks anyone?

Loan delinquencies are falling, according to CoreLogic, however we are seeing a bump up in the oil patch states, especially around Houston and in Alaska. 30+ DQ rates fell 0.6% YOY to 4.6% in August. These were the lowest numbers in a decade, however the hurricanes will probably bump up those numbers in the next few readings. The number in foreclosure fell to 0.6% from 0.9% a year ago. 

The Senate came to an agreement to limit some of the post-crisis financial regulation for small and medium sized banks. The threshold for additional scrutiny was increased from $50 billion in assets to $250 billion in assets. Some larger banks who have a more traditional business like US Bancorp and PNC, were hoping for some relief, but didn't get any. “This is the first proposal that has a legitimate shot at making it to the president’s desk,” said Milan Dalal, an attorney at lobbying firm Brownstein Hyatt Farber Schreck in Washington and a former aide to Sen. Mark Warner (D., Va.), who backed Monday’s deal.