Morning Report: Fed "halfway there" in terms of rate hikes

Vital Statistics:

	Last	Change
S&P Futures	2426.8	0.0
Eurostoxx Index	374.1	-0.1
Oil (WTI)	48.7	0.1
US dollar index	86.1	0.0
10 Year Govt Bond Yield	2.18%
Current Coupon Fannie Mae TBA	103.09
Current Coupon Ginnie Mae TBA	103.97
30 Year Fixed Rate Mortgage	3.88

Stocks are flat this morning on no real news. Bonds and MBS are flat as well. 

Very slow news day, as the chatter relates primarily to the eclipse today.

The Chicago Fed National Activity index slipped a bit in July, indicating the economy is growing more or less on its historical trend line. Employment-related indicators were a plus, while consumption related indicators were a drag. 

Not a lot of data this week, but there will be a conference of central bankers at Jackson Hole this week. The subject will be focused on regulation and financial stability so I don't expect much in the way of market moving data. Janet Yellen will speak on Friday. 

San Francisco Fed President John Williams says the "normal" Fed Funds rate should be about 2.5% or so. In other words, we are about halfway there. To put that number in perspective, it used to be in the 5% to 6% range before the financial crisis. 

As we head into September, the debt ceiling fight will take center stage. This has usually been a contentious issue and this time should be no different. Nancy Pelosi is rumored to be demanding some sort of censure for Trump regarding his Charlottesville comments as the price of Democratic Party support. If so, this one could go down to the wire. Remember the last time we had a government shutdown, we were unable to get tax transcripts from the IRS for a couple of weeks. Take this into account and order before the debt ceiling deadline if you can. 

The NY Fed bumped up its estimate for Q3 GDP to 2.1% from 2%. Note the Atlanta Fed is forecasting 3.7% GDP growth. Industrial metals have been on a tear, which is a tell for global growth. 

Nationstar is now officially Mr. Cooper. 

Morning Report - No Good Deed Goes Unpunished

Vital Statistics:

	Last	Change	Percent
S&P Futures	1413.5	8.2	0.58%
Eurostoxx Index	2500.1	9.5	0.38%
Oil (WTI)	86.63	0.9	1.05%
LIBOR	0.313	-0.001	-0.32%
US Dollar Index (DXY)	79.82	-0.091	-0.11%
10 Year Govt Bond Yield	1.84%	0.05%
RPX Composite Real Estate Index	194.1	-0.1

Markets are stronger this morning after a strong durable goods report and a good UK GDP number. Initial Jobless Claims came in at 369k and last week was revised upward to 392k.  Capital Goods orders were flat. We had a slew of decent earnings reports this morning, and Apple will report after the close. Bonds are getting clocked on the durable goods number, with the 10 year down a point and mortgages down 10 ticks.

The Chicago Fed National Activity Index came in flat, but the 3 month moving average is still negative, indicating the economy is growing below trend.

The FOMC statement yesterday was more or less a rehash of the prior statement.  Bond Traders who were looking for the Fed to add Treasuries to the QE mix were disappointed. The Fed noted that household spending has been advancing, while growth in fixed business investment has slowed.  Today's durable goods and capital goods reports bear that out.

The global slowdown is causing another round of job cuts.  This time, it is more than just Wall Street as Ford, Dow Chemical, Colgate Palmolive, AMD, and HP are all cutting staff.  The number of announced job cuts in the last 2 months is the highest since 2010.

The government is going after Bank of America for the sins of Countrywide. Needless to say, the consumer groups are delighted.  Lenders warn that credit will become even tighter. Certainly the litigation risk will get passed onto borrowers through higher rates and fees. Barney Frank believes the government should lay off JP Morgan for the sins of Bear, and claims that the government asked BOA to buy Merrill, but not Countrywide.

Whatever happened to the San Bernardino eminent domain idea?  This was the plan that involved the county taking performing underwater mortgages from the banks and forgiving principal. It appears the firestorm of criticism has caused the county to quietly table the idea.

Speaking of foreclosures, ABC News has a depressing photo essay of the foreclosure crisis.

Morning Report

Vital Statistics:

	Last	Change	Percent
S&P Futures	1296.5	5.7	0.44%
Eurostoxx Index	2146.8	2.1	0.10%
Oil (WTI)	91.62	0.1	0.15%
LIBOR	0.467	0.000	0.00%
US Dollar Index (DXY)	81.26	-0.036	-0.04%
10 Year Govt Bond Yield	1.73%	0.01%
RPX Composite Real Estate Index	175.6	0.0

Markets are generally firmer this morning on comments from Chinese Premier Wen Jiabao supporting further measures to boost the economy. Euro sovereign sovereign spreads are a touch wider. Bonds and MBS are down.

The Chicago Fed National Activity Index rose .11 in April after falling .44 in March. This basically means that the economy is growing at its historical trend. Anything between -.7 and +.7 is considered on trend. Production was a positive factor, while consumption was negative. Employment was neutral.

Is the Fed more optimistic about future growth than Wall Street?  It appears to be the case. The average Wall Street growth forecast for 2012 is 2.3%, while the Fed is forecasting 2.4% - 2.9% growth. One explanation is that the Fed underestimates how much the credit-multiplier breaks down in the aftermath of asset bubbles. Meanwhile, the TIPS market is trimming its inflation forecast and giving Ben Bernake the room to maneuver.

Facebook has broken the IPO price in the pre-open and is trading at 36.51.  5.6 million shares have traded. Bob Griefeld, CEO of NASDAQ, blamed software glitches for the problems with trading FB on Friday where customer sell orders were delayed on the open.