Morning Report: Wages and salaries accelerating

Vital Statistics:

	Last	Change
S&P Futures	2835.5	11.0
Eurostoxx Index	396.6	0.4
Oil (WTI)	64.2	-0.3
US dollar index	83.0	0.0
10 Year Govt Bond Yield	2.71%
Current Coupon Fannie Mae TBA	103.591
Current Coupon Ginnie Mae TBA	103.688
30 Year Fixed Rate Mortgage	4.19

Stocks are higher this morning after global markets recovered overnight. Bonds and MBS are flat.

We should get the FOMC decision today around 2:00 pm EST. Be careful locking around then. The consensus seems to be that this will be a no change / hawkish tone type of statement. 

This will be Janet Yellen's last FOMC meeting. Jerome Powell seems to be cut more or less from the same cloth as Yellen, so the Fed's go-slow approach to hiking interest rates will probably continue. 

Treasury increased the size of its debt issues for the first time since 2009 this morning on the back of increased deficit spending and lower purchases from the Fed. They are offering $66 billion of 3, 10, and 30 year notes this time around, an increase from $62 billion in November. Less purchasing by the Fed plus increased issuance = higher interest rates, at least at the margin.  

Mortgage Applications fell 2.6% last week as both purchases and refis fell by the same amount. The average 30 year conforming rate increased 6 basis points to 4.41%

The ADP jobs number came in at 235,000 last month, which was higher than expectations. The Street is looking for 175,000 jobs in this Friday's jobs report. 

Compensation is accelerating, according to the Bureau of Labor Statistics. The Employment Cost Index rose 0.6% in the fourth quarter, and is up 2.6% YOY. Private Industry compensation rose faster than government, with wages and salaries up 2.8% YOY. A year ago, that annual increase was 2.3%. The industry with the biggest increase? Truck drivers. 

The "typical" mortgage payment rose 12% last year, according to CoreLogic. This measure takes the median home price and calculates the principal and interest payment using the prevailing Freddie Mac mortgage rate and assumes a 20% down payment. They are looking for this payment to increase another 13% next year as home prices and interest rates continue to rise. 

Pending home sales rose 0.5% in December, according to NAR. Home sales are being depressed by tight inventory despite strong growth in wages and jobs.