Morning Report: New Home Sales rise

Vital Statistics:

 LastChange
S&P futures4,006-3.75
Oil (WTI)78.12-2.83
10 year government bond yield 3.74%
30 year fixed rate mortgage 6.59%

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

The big event today will the the FOMC minutes at 2:00 pm today. Investors will be looking for clues that the Fed is ready to pivot to a less hawkish monetary policy. The consensus seems to be that we will get a 50 basis point hike in December and then another 50 sometime in 2023.

The yield curve continues to invert, with the 2s 10s spread now at 80 basis points. This sort of inversion was last seen in the early 1980s which was during a pretty major recession.

With the Fed Funds target rate at 3.75% – 4.00%, the 10 year is below the overnight rate, and the 30 year is almost there.

The decline in long-term rates is helping the mortgage market, which had its second straight increase in weekly applications. The composite index rose 2.2% as purchases increased 3% and refis increased 2%. “The 30-year fixed-rate mortgage fell for the second week in a row to 6.67 percent and is now down almost 50 basis points from the recent peak of 7.16 percent one month ago,” said Joel Kan, MBA Vice President and Deputy Chief Economist. “The decrease in mortgage rates should improve the purchasing power of prospective homebuyers, who have been largely sidelined as mortgage rates have more than doubled in the past year. As a result of the drop in mortgage rates, both purchase and refinance applications picked up slightly last week. However, refinance activity is still more than 80 percent below last year’s pace.”

Consumer sentiment declined in November, according to the University of Michigan Consumer Sentiment Index. Sentiment was weighed down by rising interest rates, a weakening labor market, and continued inflation. That said, inflationary expectations for the next year ticked down to 4.9% from 5.0%, although longer-term expectations remained in the 2.9% – 3.1% range. The last time expectations were this high 2008 and the early 1980s.

New Home sales rose 7.5% MOM in October to a seasonally adjusted annual rate of 632,000. This is still down about 5.8% on a YOY basis. The median price was up 24% YOY to 493,000.

Author: Brent Nyitray

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

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