Morning Report: New home sales rebound

Vital Statistics:

S&P futures3,83131.82
Oil (WTI)106.381.84
10 year government bond yield 3.09%
30 year fixed rate mortgage 5.82%

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

The S&P Flash Composite Purchasing Managers Index showed the economy slowed pretty dramatically in June. PMI Indices are based on questionnaires given to business executives, so they are a little more timely than some of the government statistics.

Service industries fared a little better than manufacturers, which is starting to see evidence of demand destruction. New orders contracted for the first time since July of 2020. Pricing pressures show no sign of abating however. Business confidence numbers fell to the lowest in over a decade.

It is possible that we are on the cusp of “bad news is good news” as far as market sentiment – where economic weakness is interpreted as good news for stocks and bonds because it means the Fed may ease up on the brakes. We aren’t there quite yet, but it feels like we are close.

Regardless of the PMI data, the Fed Funds futures are still a lock for 75 basis points in hikes at the next meeting.

New Home Sales rose 10.7% MOM to a seasonally adjusted annual pace of 696,000 units. This is still down over 5% on a YOY basis. The Street was looking for 587k, so this is an upside surprise. Note that April’s number was exceptionally low, so perhaps some sales got pushed to May. Regardless, housing still remains a bit of a drag on the economy.

The University of Michigan Consumer Sentiment index slipped in June to 50. This is a big decline from May, and it confirms the lousy initial reading. This is the lowest reading on record for the index. It is down an astounding 41% on a YOY basis.


Author: Brent Nyitray

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

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