A little discussed reason the stock market may have hit bottom and started to recover: The realization that the lowest oil prices in four years will provide a stimulus of more than $1T to global economies, according to Citigroup.
“A reduction in oil prices also results in a reduction in prices across commodities, starting with natural gas, but also including copper, steel and agriculture,” says Ed Morse, the bank's head of global commodities research.
Alas, some big banks say the collapse in oil is nearly over, but much will depend on whether OPEC supports the price by cutting production, as is the norm, or protects its market share by keeping production steady.
One of the key issues serving as a road block to mortgage lending is banker fear over having any loans put back to them by the GSEs at any time - even years down the road - for any number of reasons.
This concern was voiced most pointedly in the late summer by Wells Fargo (WFC +1.2%) CEO John Stumpf in the kind of call-out of regulators you don't often hear from corporate leaders.
The WSJ is now reporting that Fannie (OTCQB:FNMA +5.9%), Freddie (OTCQB:FMCC +7.3%), their regulators, and banks are near a deal in which the lenders could feel protected enough to begin granting mortgages to those without perfect credit and employment histories.
September housing starts at a seasonally-adjusted rate of 1.017M were 6.3% higher than August and 17.8% higher than a year ago, with single-family starts up just 1.1% from August and volatile multi-family starts up a big 18.5%.
Building permits rose 1.5%, with single-family permits down 0.5% and multi-family up 7%.
Detroit has taken a major step towards exiting bankruptcy protection after agreeing to a deal with with its largest holdout creditor, Financial Guaranty Insurance Company, which is owed $1B.
Under the settlement, Financial Guaranty will have the rights to develop a hotel, retail and condominium complex on the site of the Joe Louis Arena, the soon-to-be-vacant home the Detroit Red Wings hockey team.
The dispute between Detroit and Financial Guaranty had threatened other important deals that the city had forged with thousands of creditors.
Another crazy day in bond land has the U.S. 10-year Treasury yield higher by one basis point to 2.15% after earlier falling all the way to 1.97%. Helping is some decent economic data (Philly Fed, jobless claims), and a turnaround in equities as both the Fed and ECB put out word - in case anyone forgot - of their willingness to step in to arrest just about any market decline.
The asset purchase program is on track to end this month, but St. Louis Fed boss Jim Bullard - among the more hawkish of FOMC members over the past few months - floats the idea of continuing QE for a while longer.
Speaking in a Bloomberg interview, Bullard says the plan to exit has always been data dependent, and the Fed cannot "abide" the recent drop in inflation expectations seen in TIPS. "Maybe this is a juncture where we want to invoke this clause that it is data-dependent."
This makes it twice this week a Fed-head has suggested the idea of either continuing or even adding to QE.
Alongside a major reversal in stocks - with the Russell 2000 now higher by 1.3% and the Nasdaq back to flat - has been an even bigger turnaround in Treasurys.
The 10-year yield plunged all the way down to about 1.90% earlier this morning (from 2.20% yesterday) as "position squaring" in futures combined with some fixed-income bullish news and data to create a buying panic. The yield has now returned to 2.15%. Once up around 4% on the session, TLT is ahead just 0.3%.
At a closed door meeting last weekend, Fed boss Janet Yellen told the Group of 30 of her confidence in 3% U.S. growth despite slowing global activity and shaky financial markets. She also said she sees inflation rising back up to the Fed's 2% target.
The remarks are not out of line with recent Fed forecasts, but the story here is the fact that someone chose to leak them out to panicky markets today.
Modest to moderate growth is reported in most economic districts (moderate > modest), with six districts showing moderate growth, five modest, and one - Boston - painting a "mixed picture."
Most districts reported consumer spending growth from slight to moderate - a pace similar to the last Beige Book, but general merchandise retailer in New York noted weaker sales.
Residential construction and real estate activity were mixed since the last report, and credit standards generally reman unchanged.
Most districts reported some employers as having difficulty finding qualified workers for certain positions, with a number of districts reporting upward wage pressure for certain occupations like skilled labor in construction and manufacturing.