Morning Report: Big week of data coming up.

Vital Statistics:

 LastChange
S&P futures3,998-33.75
Oil (WTI)74.41-1.83
10 year government bond yield 3.69%
30 year fixed rate mortgage 6.56%

Stocks are lower this morning on Chinese protests over COVID lockdowns. Bonds and MBS are up.

We have a big week of data coming up with house prices on Tuesday, GDP on Wednesday, Personal Incomes and Outlays on Thursday and the jobs report on Friday.

The FHFA House Price Index will be released on Tuesday. This will be the final number to establish the conforming loan limits for 2023. As of now, the consensus seems to be that the new limit will be 715k or so.

The PCE Price Index (the Fed’s preferred inflation index) will be released on Wednesday. We will also get one more CPI print before the Fed announces its decision for December.

Single family rents rose 10.2% YOY, according to CoreLogic. “Annual single-family rent growth decelerated for the fifth consecutive month in September but remained at more than twice the pre-pandemic growth rate,” said Molly Boesel, principal economist at CoreLogic. “High mortgage interest rates may be causing potential homebuyers to hit pause and remain renters, keeping pressure on rent prices.  However, the monthly rent change was negative in September, resuming the typical seasonal pattern for the first time since 2019, which could signal the beginning of rent price growth normalization.”

Interestingly, the lag between home price appreciation and rents is about 21 months, which means that we are looking at home price appreciation from early 2021. In theory, we should see an acceleration of rental inflation as the home price growth of 2021 and 2022 is still not reflected in the numbers yet.

The big banks are largely forecasting a recession for next year and a Fed Funds rate of 5%+

Most strategists think the S&P 500 will end 2023 lower than where it is today.

Author: Brent Nyitray

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

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