A nice opening today after support increased yesterday in the bond and mortgage markets. US stock indexes early in the futures markets were generally unchanged at 9:00 am EST after being stronger earlier.
Weekly MBA mortgage applications were weak; down 4.9% from the prior week, purchase apps -6.0% and re-finance apps -4.0%. No matter how you split the banana, recent housing data has been slow. Some blame higher rates, others worry over lack of supply; both are correct, but mortgage rates have not moved much over the last month. Unadjusted purchase applications were 1% higher than in the same week a year ago, back in the positive year-on-year territory after turning negative in the prior two weeks. The refinance share of mortgage activity rose by 0.8 percentage points to 37.6%
May durable goods orders were surprisingly weak; orders were thought to be -0.6% as reported were -0.6%; but excluding the volatile transportation orders, the forecasts were +0.5%, as reported -0.3%. Exports were up +2.1%, while imports were up 0.2%. Vehicle orders fell 4.2% in the month with vehicle shipments down 4.4%; a lot of that was due to Ford having to stop truck production due to a fire at a key parts supplier. Civilian aircraft orders, which had been very strong earlier in the year, fell for a second month, down 7.0% following April's 30.3% downswing. Excluding vehicles and civilian aircraft as well as all other transportation equipment, orders were still lower, down 0.3%. Trade issues beginning to find their way into actual reality.
The May trade deficit was at -$64.6, less than -$68.8B estimates. The May advance retail inventories were up 0.4% but down from +0.5% in April. Advance wholesale inventories for May thought to be +0.3% increased +0.5%.
Overnight the DJIA was down 200 points at one time. Then President Trump said he would back off of some of the China threats. The Trump administration said it would use a strengthened security review process to deal with threats from Chinese investments in domestic technologies instead of imposing China-specific restrictions. Secretary of Treasury Mnuchin has recommended using the Committee on Foreign Investment in the United States to control transactions that Trump categorized as security issues and intellectual property stealing. Mnuchin said on CNBC the changes do not target China, and he does not expect any significant economic effect from the enhanced review process. The White House won't be looking to block companies with 25% or more of Chinese ownership from buying certain U.S. tech-related companies as the president tweeted yesterday.
At 9:30 am the DJIA opened +40, NASDAQ +24, S&P +7. 10 yr at 9:30 2.85% -3 bps from yesterday. As you know, our models turned friendly when the 10-yr broke 2.90%, but the momentum kind of dragged the past few sessions. At its current level, the bellwether 10-yr is testing its 100-day average, and the momentum oscillators are picking up a little momentum. Particularly impressive this morning, improving rate markets even with the equity markets trading slightly positive.
At 10:00 am May NAR pending home sales were expected +0.5%; as reported sales declined 0.5% — more soft housing news. April pending home sales were also lower, down -1.3%.
This afternoon the Treasury will sell $36B of 5-yr notes; yesterday’s 2-yr auction was soft.
Larry Kudlow, director of the National Economic Council, returned to work at the White House on Monday, two weeks after being hospitalized for a mild heart attack. Good news.Source: TBWS
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