Succinct Summation of Week’s Events:
1) At least for asset prices, QE forever is back on. I get that data didn’t meet their ‘data dependent’ criteria but…
2) Refi apps bounce 17.9% after plunging 20.2% last week. Purchase apps rise 2.5% after being down 2.7%. Bankrate.com said the average 30 yr mortgage rate last night was 4.37% vs 4.57% last Friday.
3) Single family housing starts in August rise to most since February and permits gain to highest since May ’08.
4) August existing home sales total 5.48mm annualized, the best since February ’07 but as the NAR said, “rising mortgage rates pushed more buyers to close deals, but monthly sales are likely uneven in the months ahead from several market frictions.”
5) NAHB home builder sentiment index holds steady at highest since November ’05 at 58 but Outlook moderates by 3 pts “as many are reporting some hesitancy on the part of buyers due to the sharp increase in interest rates.”
6) The Fed doesn’t like it but the average American consumer does, August CPI up just .1% both headline and core vs the estimate of up .2% for both. Core rate y/o/y though up 1.8%, a 5 month high led by rents. Headline inflation moderates to 1.5% from 2%.
7) Initial Jobless Claims total 309k vs the estimate of 330k but Dept of Labor not clear to us if California and Nevada computer issues have been resolved. More Wash, DC transparency needed?
8) Philly manufacturing in September jumps to 22.3 from 9.3 to the best level since March ’11 and the 6 month outlook spikes almost 20 pts to the highest since 2003.
9) After foreigners sold a net $40.8b worth of US Treasuries in June as the market selloff was ongoing, they tried to catch a knive in July by buying a net $33.8b in July thanks mostly to Japan.
10) Japanese exports in August rise 14.7% y/o/y, about in line with the forecast but the biggest increase since August ’10.
1) Fed still doesn’t see that the risks of an ever growing balance sheet that does little but manipulate and distort the pricing mechanism which is at the core of free markets and an efficiently run economy, far outweighs the rewards of higher asset prices which will be temporary when policy eventually reverses. That this reversal will be in the hands of the bond market rather than by the Fed is becoming more evident. Don’t mess with the bond market when that is your transmission mechanism for policy. As Esther George said today, “signals without follow through erode intent of policy.”
2) Multi family starts and permits in August moderate from July but secular change to renting will continue.
3) NY manufacturing slows a touch from August to 6.3 from 8.2 and is below the estimate of 9.1. The outlook up by 3 pts to the best since April ’12.
4) UK retail sales unexpectedly fall in August.
5) Foreign Direct Investment in China up just .6% in August, well below the estimate of up 12.5%. Also, no signs of cooling in China’s over heated housing market as prices rise 16-19% y/o/y in the top 4 cities in August.
6) Congress far apart in providing us with a budget for the next fiscal year.
Managing Director, Chief Market Analyst
The Lindsey Group LLC
peter -at- thelindseygroup -dot- com