Market News: Stimulus, Job Market, and Mortgage Applications

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Published Date 3/18/2020

The backing and filling in the stock indexes continue this morning, yesterday the DJIA +1049, this morning at 8:30 -1,031. Yesterday, the 10 yr note yield increased 35 bps to 1.08%, this morning at 8:30 am ET 1.07%. MBS prices yesterday were down 5 bps this morning +8 bps. This morning the stock indexes are once again locked limit down at 8:30 am ET.

The economic stimulus plans are moving between congress and the administration pushing toward massive help for citizens. Trump plans to give every American $1,000 in a check to increase spending and shore up the economic outlook, although it isn’t going to help much, and the cost, together with all of the other plans, is estimated at $1 trillion.

Back in January, the job markets were exceptionally strong, still are, but now layoffs are increasing, and the outlook for business collapses has increased. Some airlines won’t survive, cruise lines vulnerable, many small businesses won’t make it (restaurants and service sector businesses). The draconian fall of the world economies is fear-based of the unknown; it isn’t driven by economic weakness. A vaccine is at least one year away. Meantime the stock indexes are trying to form a bottom. The DJIA has had 7 days now with its price swinging 1,000 points or more. The Federal Reserve said Tuesday it would relaunch the Primary Dealer Credit Facility, originally established in 2008. It will seek to lessen strains in funding markets by expanding loans to the 24 large financial institutions known as primary dealers; they function as the Fed’s exclusive counterparties when trading in financial markets.

President Trump just announced the closing the border with Canada for non-essential travel, but trade will continue.

This morning weekly MBA mortgage applications were a little soft; overall apps down 8.4% from the week prior, purchase apps -1.0% while refinance apps were down 10.0% from a 79% increase the week before. The refinance index was 402 percent higher than the same week one year ago. The purchase index was 11 percent higher than the same week one year ago. The refinance share of mortgage activity decreased to 74.5 percent of total applications from 76.5 percent the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 6.4 percent of total applications. The FHA share of total applications increased to 7.3 percent from 6.9 percent the week prior. The VA share of total applications increased to 14.5 percent from 13.1 percent the week prior. The USDA share of total applications increased to 0.4 percent from 0.3 percent the week prior.

Feb housing starts and permits this morning (starts better than forecasts); starts were down 1.5% on thoughts of down 4.0% permits down 5.5% about as expected.

At 9:30 am ET, the DJIA opened -1214, NASDAQ -404, S&P -132. 10 yr at 9:30 am ET 1.08% unchanged from yesterday. MBS prices at 9:30 am ET -8 bps from yesterday, and -7 bps from 9:30 am ET yesterday.

The 10 yr note has been volatile so far today; at 1:45 am ET 0.99% -9 bps, at 5:30 am ET 1.21% +13 bps from yesterday. At 10:00 am ET back to 1.08% unchanged. The dollar is screaming higher, which puts a new headache for virus-battered economies globally, with emerging markets especially vulnerable as they try to cope with collapsing currencies and plunging demand. US crude prices fell to their lowest levels in more than 17 years this morning. The number of confirmed coronavirus infections topped 200,000, more than doubling in two weeks, despite an escalation in global travel restrictions and the imposition of home quarantines in many parts of the world.

Source: TBWS

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