TGIFriday the 13th. Earlier this morning, the Commerce Department reported a 36.5 billion trade deficit in September, nearly 5 billion above expectations. This represents an 18.2% increase in the total deficit, the largest increase since February 1999. The increase was due to a 5.8% increase in imports, the largest since March 1993.
Both imports and exports were on the rise to their highest levels since December 2008. The release points to a pickup in global demand. October Import Prices were also released, up .7%, just a touch under expectations of 1.0%. Petroleum prices did the damage, up .9%. Import prices are also being supported by a falling dollar which is off nearly 13% this year alone.
The Michigan Sentiment Survey was the last piece of this morning’s data. The index fell nearly 4 points to 66.0. Every component of the index fell in early November, painting a picture of one cranky consumer. It also gives credence to yesterday’s MBA Purchase Index which fell to 9 year lows. Overall, the release looked disastrous but the devil was in the details as longer term inflation expectations are beginning to rise. While the one year inflation bogey fell, the three to five year expectations were up .3%. This will be on the Fed’s radar.
On the release, bonds rallied but were quickly met with fast money sellers. Books profits from auction longs with the chart right up against resistance just made sense. Currently, the 10 year note is off its highs but still up 2/32’s to yield 3.44%. As we mentioned yesterday, a close below 3.45% will confirm a “technically bullish” chart and increase the probability of better mortgage pricing. Mortgage backs have had a good day, tightening their spread to the 10 year note. Current coupon 4.50% FNMA/FHLMC is up 7/32’s (we priced up 6/32’s). Stocks began the day near unchanged but are now up 75 on the big board.
We like the market for a number of reasons but must also caution you on its proximity to resistance. We are just a few ticks away from the 76% fibo retracement level which has stone walled the 10 year note for the past few days. Shorter term oscillators are creeping into overbought levels as well. Nothing huge here but with mortgage pricing at current levels, but be careful.
Overall, a pretty nice day even if its Friday the 13th. Speaking of Friday the 13th, contrary to you horror film freaks, it is not about Jason or Freddie. The fear of Friday the 13th is called “paraskevidekatriaphobia”, a word derived from the concatenation of the Greek words “Paraskevi”, “dekatreis”, and “phobia”. According to folklore, there is no written evidence for a “Friday the 13th” superstition before the 19th century. The earliest know documented reference occurred in a 1869 biography of Gioachino Rossini. Rossini regarded Friday as an unlucky day and the 13th as an unlucky number. Funny that he died on Friday the 13th. Modern day folklore regards the day as either a day of good luck or one of bad luck. Let’s take the positive side and have a good luck day! We’ll try to wrap this mess up later today.