Morning Report: Personal incomes rise

Vital Statistics:

S&P futures4,381-26.2
Oil (WTI)73.44-0.45
10 year government bond yield 1.25%
30 year fixed rate mortgage 3.02%

Stocks are lower this morning as investors worry about the Delta variant of COVID. Bonds and MBS are up.

Personal incomes rose 0.1% in June, which was higher than expectations. Personal consumption expenditures rose 1%, which beat the Street as well. The inflation numbers are elevated, with the PCE price index (the Fed’s preferred measure of inflation) coming in at 4% on the headline number and 3.5% on the core number.

The employment cost index rose 0.7% in the second quarter. Wages and salaries increased 0.9%, while benefit costs increased 0.4%. For the year, employment costs are up 2.9%, with a 3.2% increase in wages and a 2.2% increase in benefits. The increase in inflation is probably transitory as the Fed has said a million times, but bears watching.

Biden asked Congress to extend the eviction moratorium that expires on Saturday. A court ruled that CDC didn’t have the authority to impose an eviction moratorium, so the government can’t play that card any more. While the House is planning on taking up the issue today, the chance of getting a legislative extension in place this late in the game is a pretty heavy lift, so we should assume the moratorium will end on Saturday.

Home price appreciation is fastest at the valuation extremes, according to Redfin. Luxury prices rose 26%, while the most affordable bucket rose 19%. Luxury is playing catch up after languishing ever since the bubble burst. The most affordable segments are prime rental stock, so first time homebuyers are competing with professional investors.


Author: Brent Nyitray

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

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