Morning Report: GDP comes in better than expected

Vital Statistics:

			Last	Change
S&P futures			2673	-1.5
Eurostoxx index			384.63	0.87
Oil (WTI)			67.92	-0.27
10 Year Government Bond Yield				2.97%
30 Year fixed rate mortgage				4.62%

Stocks are flat this morning after GDP came in higher than expected. Bonds and MBS are up small. 

The advance estimate of first quarter GDP came in at 2.3%, higher than the Street 2.0% estimate. Consumption rose 1.1%, in line with estimates, and inflation was lower than expected at 2%. In many ways, this was a Goldilocks type report, with decent growth and controlled inflation. The savings rate increased to 3.1%, compared to 2.6% in the fourth quarter. One note of caution: the first quarter has had some quirky measurement issues over the past several years, which has subjected it to subsequent upward revisions. The tax cuts will probably have a similar effect this time around. 

Wage inflation is picking up, according to the Employment Cost Index which rose 0.8% for the quarter and is up 2.7% for the year. Wages and salaries increased 0.9% compared to 0.5% in the previous quarter. For the Fed, these two reports this morning are great news. Real wage growth (2.7% increase in wages and salaries less a 2% increase in inflation) with moderate growth and inflation. 

Consumer sentiment slipped from March's 14 year high in April to a still strong 98.8.

The Fed Funds futures are predicting a 93% chance of another 25 basis point hike at the June meeting. 

North and South Korea pledged to de-nuclearize the peninsula and declare an official end to the 50 year old Korean War. 

Freddie Mac is introducing its 3% down product for first-time homebuyers - HomeOne. With an Affordable Second, the LTV can go as high as 105%. Income and geographic limits are intended to reach a broad audience. 

The CFPB has fixed the "black hole" issue in TRID.