October 27th, 2017
Suggestions that can change during the day: MBS also got a lift from the New York Fed as it purchased $1.50B in Fannie/Freddie 30-yr 3.5% and 4% coupons this morning.Stock and Bond prices get a boost on rumors that President trump leans towards somewhat dovish Fed Governor Jerome Powell as the next Fed Chair.
After close Commentary: Rumors continued to surface today that President Trump is leanings towards dovish Fed Governor Jerome Powell to be the next Fed Chair, which lifted Bond prices mid-afternoon and pushed yields lower. Bond shrugged off early morning weakness when the headlines appeared. Early on, the 3% GDP weighed on prices. The Fannie Mae 30-yr 3.5% coupon gained 28bp to end at 102.56. Stocks rose on strong tech earnings from Google (Alphabet), Microsoft and Amazon. The tech heavy NASDAQ soared by 144.48 points to 6,701.26 while the S&P surged by 20.67 points to end at 2,581.07, both record high closes. The Dow gained 33.33 points to 23,434.19. WTI oil settled at an eight month high of $53.90/barrel, $1.26. 10-yr T Note yield 2.41%. Next week's economic calendar is packed with key reports such as Core PCE, manufacturing, housing and the Jobs Report for October. There is a big rebound expected in Non-farm Payrolls, 300K for October, after the -33K reported for September due to hurricanes Harvey and Irma. Have a great weekend!
Late morning Commentary: The Bureau of Economic Analysis reports that Gross Domestic Product (GDP) grew by a solid 3% in the third quarter based on the first of three readings. Gains were led by private inventory investments, exports and federal government spending. Within GDP, consumer spending increased 2.4% following the 3.3% rise in Q2. GDP is the monetary value of all finished goods and services produced within a country's borders in a specific time period. It is considered the broadest measure of economic activity.
Consumer Sentiment came in at 100.7 for the final reading in October, just below the 101.0 expected and remains at lofty levels. The report revealed that personal finances were judged near all-time record favorable levels due to gains in household incomes as well as decade highs in home and stock values. Chief economist, Richard Curtin said, "Lingering doubts about the near-term strength of the national economy were dispelled as more than half of all respondents expected good times during the year ahead and anticipated the expansion to continue uninterrupted over the next five years."
The Federal Housing Finance Agency reported this week that home prices rose 0.7% from July to August with a 6.6% jump year over year. The FHFA monthly Home Price Index is calculated using home sales price information from mortgages sold to, or guaranteed by, Fannie Mae and Freddie Mac. The index doesn't include high-end homes purchased with jumbo loans or cash sales.
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