Daily Market Wrap

October 20, 2017

Stocks have ended the day sharply higher, the Dow closed up 165.59 at 23,328.63 and the S&P 500 closed up 13.11 at 2,575.21. This was mostly due to news that the Senate Republicans approved a $4 Trillion budget, which is a big step towards passing a tax plan this year.  Mortgage Bonds ended the day lower.

In Economic news, Existing Home Sales, which tracks closings on Existing Homes, were up 0.7% in September at a 5.390M unit annualized pace, which was better than expectations of a drop and better than last month’s 5.350M unite pace.   Inventory levels remained very tight – There were only 1.88M homes for sale, down 6.4% year over year, with a 4.2 month’s supply.  Median Home Prices are up 4.5% year over year at $245,100, but have actually cooled a bit.  Remember this may include some of the effects from the storms and even with these really tight levels of inventory, sales are still strong.  Disappointingly, the first time home buyer fell from 31% to 29%, which is the lowest level in over a year.

Economic Data

Existing Home Sales:  Actual = 5.390M; Consensus = 5.300M; Previous = 5.35M

Upcoming Events

Next week is a busy week.  We will receive Mortgage Apps, Durable Goods, the FHFA House Price index, New Home Sales, Pending Home Sales and Jobless Claims, along with some Treasury Note Auctions.

Technical Picture

Mortgage Bonds ended the day lower but off their worst levels. Bonds are still beneath the 200-day Moving Average, which will now act as resistance on the way up.  The next floor is located at 102.50.  The 10-year Treasury Note Yield is trading just beneath a very important level at 2.385%.  Begin the day carefully floating.

Position

Carefully Floating