Morning Report: New Home Sales collapse

Vital Statistics:

 LastChange
S&P futures3,933-38.25
Oil (WTI)110.20-0.19
10 year government bond yield 2.80%
30 year fixed rate mortgage 5.43%

Stocks are lower this morning after Snap reported lower-than-expected earnings / guidance. Bonds and MBS are up.

Jerome Powell will be speaking at 12:20 today. I don’t see any prepared remarks, but markets are a on a hair trigger these days, so just be aware.

New Home Sales fell to a seasonally-adjusted annual rate of 591,000 in April, which was way below consensus estimates. This is down 17% MOM and 27% compared to a year ago. The report doesn’t give much color on the reasons for the decline, and these reports often have a pretty large sampling error. This reading is typical for what we saw in the 70s and 80s.

The expansion slowed in May, according to the Markit PMI Composite Flash index. The index hit a 4 month low, with manufacturing and services both declining. New orders increased, albeit at the slowest pace since August 2020. Rising input prices hit a series high going back to 2009. “The early survey data for May indicate that the recent economic growth spurt has lost further momentum. Growth has slowed since peaking in March, most notably in the service sector, as pent up demand following the reopening of the economy after the Omicron wave shows signs of waning. Companies report that demand is
coming under pressure from concerns over the cost of living, higher interest rates and a broader economic slowdown.”

Note this puts the Fed in a bit of a bind, as demand is starting to wane early in the tightening cycle. Inflation remains too high for them to pull back on the increases quite yet.

Americans’ financial well-being improved in 2021, according to a Fed study on the subject.

Despite persistent concerns that people expressed about the national economy, the survey highlights the positive effects of the recovery on the individual financial circumstances of U.S. families. In 2021, perceptions about the national economy declined slightly. Yet self-reported financial well-being increased to the highest rate since the survey began in 2013. The share of prime-age adults not working because they could not find work had returned to pre-pandemic levels. More adults were able to pay all their monthly bills in full than in either 2019 or 2020. Additionally, the share of adults who would cover a $400 emergency expense completely using cash or its equivalent increased, reaching a new high since the survey began in 2013.

The report also looks at the emerging use of buy-now-pay-later credit, which allows people to finance purchases using simple interest and making a small number of equal payments. The people who use this often skew towards lower income and education.

Author: Brent Nyitray

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

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