Markets ponder: Bloomberg survey, Fed officials, and China trade
Published Date 9/20/2019
Not much movement in the rate markets overnight, stock indexes at 8:30 am ET in the futures trading somewhat better but nothing serious.
There are no economic releases today, but we do have three Fed officials speaking. The US manufacturing sector “already appears in recession” and overall economic growth is expected to slow “in the near horizon,” St. Louis Federal Reserve Bank President James Bullard said, explaining why he dissented at a recent Fed meeting and wanted a deeper, half percentage point rate cut.
Today is quadruple witching day when options and futures on indexes and stocks expire, usually increasing trading volume as large derivatives positions rollover. The moves coincide with a rebalancing of the S&P 500 and tend to bring some of the busiest trading days of the year. Spikes in volume usually cluster around the open and close.
Bloomberg has a survey called The Bloomberg Economic Surprise Index; released yesterday the index reached an 11 month high. Existing home sales and jobless claims, each surpassed expectations. The gauge continued to advance after swinging to positive from negative on Tuesday for the first time this year. The data also pushed a similar measure produced by Citigroup Inc. to the highest level since April 2018. The readings are signaling a somewhat brighter mood about the world’s largest economy after some indicators and markets stoked fears last month of a quicker ending to the record-long economic expansion. The FOMC policy statement on Wednesday also had better outlooks than the mood in markets. Japan and Europe are also seen as improving recently. We doubt that much attention should be made of the news, significant and permanent change doesn’t happen in a month as the survey indicates. If there were any more interesting news, this report would not even be of interest. Not implying it is wrong, but it has little significance in the wider outlook; still tough some good news.
At 9:30 am ET the DJIA opened +50, NASDAQ +9, S&P +6. 10 yr note 1.77% -1 bp. MBS prices +8 bps from yesterday’s close and +2 bp from 9:30 yesterday.
Low-level trade talks continue today in Washington with US and China negotiators setting an agenda for high-level meetings in early October. A report that Treasury has granted tariff exemptions of 437 types of imported products from China has set a favorable tone that has diminished some of the trade angst premium in the Treasury market. That latest development fits with the view that both China and the US are still in the mood to dial back the trade tensions.
The House passed a stopgap spending measure yesterday to avoid the second government shutdown of the year, funding the government until lawmakers leave for the Thanksgiving holiday. The House passed the measure on a bipartisan basis, 301-123, and the Senate is expected to approve it when they return to Washington next week ahead of the end of the fiscal year on Sept. 30. Senate Democrats voted down a bill on Wednesday that would fund most of the government. The House-passed bill was expected to be the vehicle for any Senate funding action, but the measure did not garner the needed 60 votes due to Democratic objections over the president’s border wall.
Interest rate markets holding well this morning and likely will continue through the session. Safety moves are continuing over the Saudi issue, although not a huge move but weekends at times can present surprises. Most all of our technical analysis after being negative Sept. 6 have moved to neutral. Still not bullish yet. This week so far the 10 yr note yield has declined from 1.91% last Friday to 1.77% this morning.
Source: TBWS
All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.
NMA Home Loans is Licensed by the California Department of Real Estate under License # 01111689 and NMLS # 320740
