Morning Report: The economy grew in May

Vital Statistics:


Last Change
S&P futures 30y7 14.1
Oil (WTI) 39.54 -0.39
10 year government bond yield 0.68%
30 year fixed rate mortgage 3.16%


Stocks are higher this morning on no real news. Bonds and MBS are flat.


We don’t have much in the way of market-moving data this week, however we will get some real estate data.


The economy rebounded substantially in May, according to the Chicago Fed National Activity Index. Given what I have heard from earnings calls etc, it sounds like the recession will have ended sometime in early May. I wonder if we are going to see the Q2 GDP estimates begin to get revised upwards.


Lennar mentioned something interesting on its conference call. We have known about the labor shortages in construction for a while. I guess the homebuilding industry took advantage of the shutdown and began a program to train displaced restaurant and retail workers in construction. Smart move, and if it alleviates the labor shortage we are looking at a long boom in housing construction.


Redfin is seeing a housing recovery in the May data as well. “Although the housing market was still mostly stalled in May, it’s worth noting that homes under contract to be sold jumped 33% between April and May after two consecutive months of decline,” said Redfin lead economist Taylor Marr. “This is a key leading indicator for home sales in June and July. New listings of homes for sale have also likely passed their bottom, but are still about 20% below February’s level, so there’s still a ways to go before the housing market has recouped the lost activity of the past few months during the shutdowns.”


Existing home sales fell 9.7% in May, according to NAR. “Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lockdown and hence the cyclical low point,” said Lawrence Yun, NAR’s chief economist. “Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.” Note that Lennar reported June orders were up 20% YOY.


Another sign the global economy is healing. Commodity prices are up big over the past 2 months. Remember when oil was negative? Front-month WTI is pushing $40 a barrel.


Author: Brent Nyitray

In the physical sciences, knowledge is cumulative. In the financial markets, it is cyclical

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: