Published Date 6/8/2022
Stock indexes began lower this morning. Rates are waiting until Friday when May CPI is released, moving in narrow ranges this week.
Weekly MBA mortgage apps continue to decline; last week down 6.5% from the prior week, purchase apps -7.1% and re-finances down 5.6%. 30 yr. rates last week increased to 5.40% from 5.33% the prior week (two days ago 5.50%), with points rising to 0.60 from 0.51 (including the origination fee) for loans with a 20% down payment. Apps down 21% from a year ago and the lowest applications in 22 years. Re-finance apps down 75% from a year ago. Lack of inventory still plagues the home markets.
Target has too much inventory, kind of ironic after all the shortages but driven by consumers having to spend so much more for gas and food.
Crude oil broke above $120.00 yesterday and early this morning after the UAE said prices may well climb further as Chinese demand recovers in the coming months. The UAE’s energy minister said the prospects for a jump in Chinese demand means prices could keep rising. The amount of oil that producers can add to the market “is not very encouraging,” Suhail Al-Mazrouei added. OPEC is struggling to restore production as planned, with spare capacity confined to just a few members, the UAE minister conceded.
Tomorrow the ECB policy statement, not likely to increase rates yet, talk in Europe is a minor rate increase in Sept.
The World Bank sharply lowered global growth forecasts and flagged a risk of recession in many countries. Citing the damage from Russia’s invasion of Ukraine and the Covid-19 pandemic, the World Bank said global growth is expected to slump to 2.9% in 2022 from 5.7% in 2021, significantly lower than its January forecast for 4.1% growth. For the U.S., the bank forecast growth to slow to 2.5% in 2022, 1.2 percentage points below previous projections.
At 9:30 am the DJIA opened -185, NASDAQ -36, S&P -20. 10 yr. 3.02% +3 bps. FNMA 4.5 30 yr. coupon at 9:30 am holding well, down 6 bps and +9 bps from 9:30 am yesterday.
At 1 pm $33B of 10s up for auction.
Financial markets looking to Friday’s CPI and a week from today the FOMC meeting. At 3.00% the 10 yr. has fully priced two 50 bp increases from the Fed. Concerns now center on what the Fed has in mind for more increases in September. Inflation recently still high but hasn’t increased much since March.
Source: TBWS
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