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Morning Report: Welcome to Q4


Vital Statistics:

Stocks are lower this morning as rates continue to rise. Bonds and MBS are down.

I think most investors are happy to see September (and Q3 in general) in the rear view mirror. Most asset classes lost money in September, with stocks posting their worst month this year. Bond yields spiked and about the only sector that worked was energy.

The government came up with a deal to prevent a shutdown. The deal funds the government through early November. The deal did not include any spending cuts however it didn’t include any further aid for Ukraine either. Judging by the yield on the 10 year, it wasn’t shutdown fears that were pushing rates higher.

The upcoming week will be dominated by employment data, culminating with the jobs report on Friday. The consensus is that the economy added 160,000 jobs in September, and the unemployment rate ticked down to 3.7%. Average hourly earnings are expected to have risen 4.3% on a year-over-year basis. We also get the ISM reports.

Rithm Capital (parent of NewRez and Caliber) announced the purchase of Specialized Loan Servicing and other assets from Computershare for $720 million. The deal includes about $136 billion in MSRs. “The addition of SLS continues to grow our best-in-class special servicing business and adds more clients and homeowners to the Newrez platform,” said Baron Silverstein, President of Newrez. “It further strengthens our origination and servicing channels, both of which are designed to deliver a customer experience that prioritizes a successful homeownership journey.”

Manufacturing activity contracted in September for the 8th consecutive month, according to the ISM Survey.  “The U.S. manufacturing sector continued its contraction trend but at a slower rate, recording its best performance since November 2022, when the PMI® also registered 49 percent. Companies are still managing outputs appropriately as order softness continues, but the month-over-month PMI® improvement in September is a clear positive. Demand eased marginally, with the (1) New Orders Index contracting, though at a slower rate, (2) New Export Orders Index continuing in contraction territory but with a marginal increase, and (3) Backlog of Orders Index declining. The Customers’ Inventories Index reading indicated improved supply chain efficiency, as output improved and customers’ inventories continued to decline. Output and Consumption (measured by the Production and Employment indexes) was positive, with a combined 5.2-percentage point upward impact on the Manufacturing PMI® calculation. Panelists’ companies improved production compared to August and continued to manage head counts, primarily through attrition and hiring freezes. Inputs — defined as supplier deliveries, inventories, prices and imports — continued to accommodate future demand growth. The Supplier Deliveries Index indicated faster deliveries for the 12th straight month, at a faster rate compared to August, and the Inventories Index remained in contraction territory, but improved month over month. The Prices Index remained in ‘decreasing’ territory, 4.6 percentage points lower than the August reading, signifying a return to price reductions, but energy costs in August and September could possibly affect future material costs. Manufacturing supplier lead times continue to decrease, but at a slow pace.

Housing October 2nd Weekly Update: Inventory increased 1.3% Week-over-week; Down 4.7% Year-over-year

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