Morning Report: Small business optimism falls

Vital Statistics:

	Last	Change
S&P Futures	2547.8	4.0
Eurostoxx Index	391.2	0.0
Oil (WTI)	50.2	0.6
US dollar index	86.6	-0.3
10 Year Govt Bond Yield	2.36%
Current Coupon Fannie Mae TBA	102.875
Current Coupon Ginnie Mae TBA	103.938
30 Year Fixed Rate Mortgage	3.9

Stocks are higher this morning after Walmart announced a $20 billion buyback. Bonds and MBS are flat.

Neel Kashkari speaks at 10:00 am. 

Small Business Optimism fell in September as the hurricanes hurt retail spending in Texas and Florida. We did see a weakening in the labor market, not just in Florida and Texas, but in 2/3 of all Census regions. The hurricanes will probably boost the economy into Q4 and Q1 next year, but at the moment they are depressing things. 57% of firms are trying to hire, but the vast majority of those are finding few or no qualified applicants. 

The US foreclosure and seriously delinquent rate remain very low, according to CoreLogic. The national Foreclosure rate was 0.7%, down from 0.9% last year. The Seriously Delinquent ratio was just under 2%. This is all July data, so pre-hurricane. We are starting to see the effects of the drop in oil prices in some of the energy intensive states like Alaska and Louisiana. 

Home Prices continue to rise, jumping 0.9% MOM and 6.9% YOY in August, according to CoreLogic. Their models hold that half of the largest 50 MSAs are now overvalued, which has been driven by low inventory. 

Fannie Mae is offering assistance to borrowers affected by the recent spate of hurricanes. Borrowers will be able to temporarily stop making monthly payments for 3 months (up to 12 months) without late fees, negative comments on their credit reports, or a requirement to get back current in one fell swoop. 

The IMF took up their forecast for global growth to 3.6% this year and 3.7% next year. At the margin, this means reduced demand for safe haven assets like Treasuries, which would mean higher interest rates going forward. That said, we have several real estate bubbles overseas at the moment, and when they bust, it should be bond bullish (i.e. encourage lower rates). 

Morning Report: Small business and consumers are becoming more negative on the economy

Vital Statistics:

	Last	Change	Percent
S&P Futures	2039.8	5.3	0.26%
Eurostoxx Index	2928.2	4.0	0.14%
Oil (WTI)	40.74	0.4	0.94%
LIBOR	0.631	0.002	0.32%
US Dollar Index (DXY)	93.98	0.025	0.03%
10 Year Govt Bond Yield	1.76%	0.03%
Current Coupon Ginnie Mae TBA	105.8
Current Coupon Fannie Mae TBA	104.9
BankRate 30 Year Fixed Rate Mortgage	3.65

Markets are higher despite a lousy start to the earnings season. Bonds and MBS are down.

Earnings season kicked off last night with Alcoa missing on revenues and revising down their forecast for aluminum demand. As is on cue, the IMF took down their global growth forecast for 2016 from 3.4% to 3.2%. Fastenal also missed this morning. 

Import prices rose for the first time since June of last year. Energy prices increased and food prices decreased. On a year-over-year basis, import prices are down over 6.2%. We will get two more inflation indicators this week, with the Consumer Price Index and the Producer Price Index. 

The NFIB Small Business Optimism index fell again to a two year low. The bright spot? Businesses are still adding employees, although there is a mismatch between the skills they want and the available labor pool. A net 22% of employers reported increasing wages. Capital expenditures are rising slightly, although it is tough to tell if that is merely maintenance capex or growth capex. 

Consumers are getting more pessimistic about the economy as well, according to Gallup. Voters are mad as hell, and they aren't going to take it anymore. 

Completed foreclosures fell to 34k in February, according to Corelogic. This is a decline of 10% YOY. There are 434k homes in foreclosure, down 24% from a year ago. This is roughly where foreclosures were in late 2007. 1.25 million mortgages are seriously delinquent, which is down 20% from a year ago. Foreclosures remain an issue in the judicial states (especially in the Northeast) but aren't an issue anywhere else. We are seeing delinquencies creep up in the energy states. 

Another day, another settlement with the DOJ. Goldman settled with the DOJ for $5.1 billion.  I wonder how the fines stack up compared to the bailout money received.