Yesterday the DJIA rallied -559 points. This morning at 8:00 am ET, the DJIA is down -523. The movement today is in the rate markets, the 10 yr note yield at 8:30 am ET 0.68% -7 bps from yesterday and breaking a little from 0.71% that has been the 10 yr note’s low since April 7th. MBS prices at 8:30 am ET -6 bps from yesterday.
MBA mortgage applications held up well last week; the composite +7.3%, purchase apps -2.0% better than -12% the week before, refinances increased +10.0% from -19.0% the week before.
March retail sales were thought to have declined -7.5%, as released -8.7%. Most of the decline was in the auto sales, ex-auto sales down -4.5% against forecasts of -4.2%. The control group, a broader look, was estimated at -1.8%, as released +1.9%. The headline looks nasty, but the components tend to moderate the headlines you will see on the news.
The April NY Empire State manufacturing index crashed. The index was expected to take a sizeable drop to -35.0 after falling to -21.5 in March; as reported, the index plummeted to -78.2. Of course, that is a record and one more look at the state of manufacturing in NY. Given the virus explosion in NY, the sharp fall isn’t too much of a shock.
Last weekend Pres. Trump, the Saudis, and Russia agreed to cut oil output by 10 million barrels a day to stop the declines. It worked for one day the oil prices plunged; this morning crude is trading back under $20.00 ($19.58 at 9:00 am).
About 5.5 million people are estimated to have filed for unemployment last week, in data due out tomorrow. That would push the four-week total above 22 million, roughly one-in-eight of the workforce — essentially wiping out all the job gains since the last recession. Job losses, either layoffs or permanent, are increasing more than the economists were expecting. Some economists now see the jobless rate surging to 20% as soon as this month — and there’s no guarantee it would stop there. It is highly likely that when this virus situation is behind us the next concern will be that many of the jobs will not come back. The idea that employment will bounce back quickly isn’t going to occur for a couple of years. From 3.5% unemployment to 30% is not out of the question.
At 9:15 am ET, March industrial production and factory use; production expected -4.2% dropped 5.4%, manufacturing production fell 6.3% on a forecast of -4.0%. Factory use at 72.7% from 77.0% in February. The Federal Reserve’s monthly index of industrial production and the related capacity indexes and capacity utilization rates cover manufacturing, mining, and electric and gas utilities. The industrial sector, together with construction, accounts for the bulk of the variation in national output throughout the business cycle.
At 9:30 am ET, the DJIA opened -547, NASDAQ -157, S&P -62. 10 yr at 9:30 am ET 0.67% -7 bps from yesterday. FNMA 3.0 coupon at 9:30 am ET -3 bps from yesterday’s close, and +3 bps from 9:30 am yesterday.
At 10:00 am ET, the April NAHB housing market index was thought to be at 59.5 from 72 in March and down from 77 in January; the index plunged to 30.
At 2:00 pm ET, the Fed Beige Book, the Fed’s details from the 12 Fed districts; not likely to add to what is well known.
New data from the airlines: We’ve gone from 2.1 million passengers a day to 87K going through security.
Citigroup reported a 46% plunge in quarterly profit this morning. The bank set aside nearly $5B to prepare for an expected flood of defaults on loans due to a virtual halt in economic activity. Most global of the US banks recorded a $4.89B expense to increase its reserves against anticipated losses on loans, primarily from its credit cards because of rising unemployment. The big and medium-sized banks all recording weak earnings, not really a surprise. Chase said yesterday its profit plunged by more than two-thirds from a year earlier, mostly because of $7 billion addition to loan loss reserves, half of which were for credit cards. Chase and Citigroup are the first and third biggest card issuers, respectively, in the United States.
Source: TBWS
