Friday, May 22, 2015
- “If the economy continues to improve as I expect, I think it will be appropriate at some point this year to take the initial step to raise the federal funds rate,” says Fed boss Janet Yellen, at a speech in Providence, RI. "We are not there yet," she says of the strong, but not full-strength labor market.
- "I anticipate that the pace of normalization is likely to be gradual ... it will be several years before the federal funds rate would be back to its normal, longer-run level."
- Core CPI gained 0.3% in April - the fastest pace since January 2013 - and coming against expectations for a 0.1% rise. Core CPI was up 1.8% Y/Y in April, the same as March.
- Headline CPI rose 0.1% in April, and fell 0.2% Y/Y.
- Lower by two basis points ahead of the number, the 10-year Treasury yield is now higher by two bps to 2.21%. TLT -0.35%, TBT +0.7%
- ETFs: TBT, TLT, TMV, IEF, TBF, EDV, TMF, PST, TTT, ZROZ, TLH, SBND, VGLT, IEI, TYO, UBT, DLBS, DTYS, UST, TLO, VGIT, TBX, SCHR, TENZ, GSY, TYD, LBND, ITE, DTYL, DLBL, TYBS, DFVL, FIVZ, VUSTX, TBZ, DFVS, TYNS, SYTL
- Core CPI rose 0.3% in April, the fastest pace since January 2013. Forecasts had been for just a 0.1% gain. Over the last 12 months, core CPI was up 1.8% in April, the same as March.
- The overall CPI was higher by 0.1% in April and lower by 0.2% year-over-year.
- The dollar bull ETF (NYSEARCA:UUP) is up 0.4% after the news. Against individual currencies, the greenback jumped about 100 pips vs. the euro (NYSEARCA:FXE), with similarly-sized moves vs. the aussie (NYSEARCA:FXA), loonie (NYSEARCA:FXC), swissie (NYSEARCA:FXF), yen (NYSEARCA:FXY), and cable (NYSEARCA:FXB).
- ETFs: UUP, UDN, UUPT, UDNT, FORX, USDU
- A speech by Fed Chair Janet Yellen and consumer inflation data will guarantee that traders will have more to focus on today in what might otherwise be a sluggish day ahead of Memorial Day weekend.
- Although trading desks will be lightly staffed, they will be primed for Yellen's 1 p.m. ET speech on the economy.
- The consumer price index will be released earlier at 8:30 a.m. ET, and is expected to show a 0.1% gain on the headline, or 0.2%, without food or energy.
- U.S. futures are all higher by 0.1%.
Thursday, May 21, 2015
- Fannie Mae (OTCQB:FNMA) chief economist Doug Duncan sees 2015 single-family mortgage originations of $759B, up 8% from his forecast at the start of the year. Were originations to hit that level, they would be up 12% from 2014.
- "Purchase mortgage applications have moved up consistently for a couple of months,” says Duncan.
- Previously: Housing starts jump in April (May 19)
- Average fixed mortgage rates moved slightly lower following three consecutive weeks of increases, according to the latest weekly survey from Freddie Mac.
- The average rate for the 30-year fixed-rate mortgage ticked lower to 3.84% from the prior week's average of 3.85%, which was the highest in two months; a year ago the rate averaged 4.14%.
- The average rate for the 15-year fixed-rate mortgage fell to 3.05% in the latest week from 3.07% in the prior week; a year ago the rate averaged 3.25%.
- Apr Leading Indicators: Leading Index +0.7% to 122.3 vs. +0.3% expected, +0.4% (revised) in March.
- Coincident Index +0.2% to 112 vs. -0.1% prior.
- Lagging Index +0.1% to 116.6 vs. +0.5% prior.
- "April’s sharp increase in the LEI seems to have helped stabilize its slowing trend, suggesting the paltry economic growth in the first quarter may be temporary,," said Economist Ozyildirim.
- May US PMI Manufacturing Index flash 53.8 vs 54.5 consensus, 54.1 prior.
- "Our common goal remains to establish the political framework for a trans-Atlantic free trade agreement by the end of 2015," Germany's Angela Merkel said in a speech to the Bundestag this morning.
- According to the European Commission, the planned Transatlantic Trade and Investment Partnership (TTIP) could generate many new jobs and $100B a year in additional output.
Wednesday, May 20, 2015
- When the numbers don't fit the narrative, change the numbers. The Bureau of Economic Analysis says it's "aware of issues" in the calculation of GDP data, and plans a fix.
- The BEA action comes after a number of economists have complained about weak reported Q1 GDP growth (currently estimated at just 0.2% and likely to go negative as updated trade and other data get plugged in) not fitting in with their view of a far stronger economy.
- CNBC says reported Q1 GDP data has been weaker than the other three quarters of the year for the past three decades, and substantially so in the last five.
- The BEA says an initial round of revisions will be completed by July 30, in time to be incorporated into the annual benchmark revisions. As Jim Chanos like to point out, things are a lot simpler in China. The mandarins in Beijing say what they would like GDP growth to be, and the statisticians make sure the numbers comply.
- Previously: San Francisco Fed: Q1 GDP growth substantially stronger than estimated (May 18)
- FOMC members lost their taste for a June rate hike between the March and April meetings, as "several" in favor in March, becomes just a "few" six weeks later.
- Nevertheless, the Committee continues to feel the Q1 growth slowdown was transitory, and thus a rate hike remains on the table for some point this year.
- The 10-year Treasury yield remains four basis points lower on the session at 2.25%, and 30-day Fed Funds futures are pricing in a 25 basis points move late in Q4.
- TLT +0.8%, TBT -1.6%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, TLH, SBND, VGLT, UBT, DLBS, TLO, TENZ, LBND, DLBL, TYBS, VUSTX
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