Published Date 5/16/2022

Early this morning the US stock indexes were generally unchanged, the 10 yr. note at 2.915 -1 bp. FNMA 4.5 30 yr. coupon at 9 am ET +9 bps from Friday.

At 8:30 am the New York state manufacturing activity unexpectedly contracted in May for the second time in three months, reflecting plunges in orders and shipments. The Federal Reserve Bank of New York’s general business conditions index dropped over 36 points to minus 11.6, a minus indicates contraction. The prices paid index fell from a record high last month to a still-elevated 73.7. The gauge of prices received also eased, signaling persistent and substantial price increases in both input and selling prices in May. The group’s employment index rose.

Goldman Sachs’ Lloyd Blankfein urged companies and consumers to gird for a US recession, saying it’s a “very, very high risk.” “If I were running a big company, I would be very prepared for it,” Blankfein said on CBS’s “Face the Nation” on Sunday. “If I was a consumer, I’d be prepared for it.” As is the norm when Wall Street bigwigs speak about anything negative, Blankfein added, a recession is “not baked in the cake” and there’s a “narrow path” to avoid it, he said. The Federal Reserve has “very powerful tools” to tamp down inflation and has been “responding well,” the former Goldman chief executive officer said. Last week’s mid-month consumer sentiment index plunged to its lowest read since 2011. Goldman’s economic team, led by Jan Hatzius, now expects U.S. gross domestic product to expand 2.4% this year, down from 2.6%. It reduced its 2023 estimate to 1.6% from 2.2%. The report called this a “necessary growth slowdown” to help temper wage growth and reduce inflation back down toward the Fed’s 2% target. While the slowdown will push up unemployment, Goldman was optimistic a sharp rise in joblessness can be avoided.

At 9:30 am the DJIA opened -53, NASDAQ -72, S&P -12. 10 yr. 2.90% -3 bps. FNMA 4.5 30 yr. coupon +13 bps, +29 bps from 10 am Friday. 30 yr. fixed now 5.38%

Morgan Stanley strategists, saying this morning prior to the open and reflecting on Friday’s stock rally. “With valuations now more attractive, equity markets so oversold and rates potentially stabilizing below 3%, stocks appear to have begun another material bear market rally,” strategists led by Michael Wilson wrote in a note on Monday. “After that, we remain confident that lower prices are still ahead.” The S&P 500 surged on Friday after nearing a 20% drop from peak as market participants were lured by more attractive valuations. But the benchmark still marked its sixth straight week in the red — the longest such decline since 2011– as investors worry a combination of surging inflation and hawkish central banks will spark a sharp economic slowdown.

At 10 am the 10 yr. note yield at 2.88% -4 bps.

This Week’s Economic Calendar:

Monday,
8:30 am May Empire State manufacturing index (expected 15.0 from 24.6 in April, as released -11.6)

Tuesday,
8:30 am April retail sales (+0.9%, ex autos +0.4%, ex autos and gad +0.6%)

9:15 am April industrial [production and capacity utilization (production +0.4%, cap utilization 78.5% from 78.3%)

10 am May NAHB housing market index (75 from 77 in April)

2 pm Jerome Powell speaking

Wednesday,
7 am weekly MBA mortgage applications

8:30 AM April housing starts and permits (starts 1.766 mil from 1.793 mil in March; permits 1.818 mil from 1.873 mil in March)

1 pm Jerome Powell Conversation with Nick Timiraos.. At the Wall Street Journal Future of Everything Festival, New York, New York

$17B 20 yr. bond auction

Thursday,
8:30 am weekly jobless claims (197K from 203K)

May Philadelphia Fed business index (16.1 from 17.6 in April)

10 am April existing home sales (5.65 mil from 5.77 mil in March)

Friday,
No data

Source: TBWS

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