Stocks are higher despite a hotter than expected PPI print. Bonds and MBS are down.
The Producer Price Index rose 1.4% in April, which was well above the March increase of 0.7% and the consensus estimate of 0.5%. On a year-over-year basis, prices rose 6%, the biggest increase since 2022. If you strip out food, energy and trade services, wholesale inflation rose 0.6% MOM and 4.4% YOY. Higher energy prices were at the root of the issue, but we also saw big increases in the prices for machinery and equipment. Trucking and warehousing also rose.
Between the CPI yesterday and the PPI today, the Fed Funds futures don’t see rate cuts in the cards anymore this year.
Mortgage applications rose 1.7% last week as purchases rose 4% and refis fell 1%. “Mortgage rates were generally higher last week, with the 30-year fixed rate at 6.46%, its highest level in five weeks,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications were higher over the week and 7% ahead of last year’s pace, with all loan types showing increases in purchase activity, as potential homebuyers shrugged off the current economic and mortgage rate uncertainties and returned to the market. Refinance applications declined slightly, led by conventional and VA refinancings, and accounted for a little more than 40% of applications last week, the lowest share since July 2025.”
Chicago Fed President Austan Goolsbee discussed how inflation remains a problem. “There’s a 2% target. We’re well above 2%, and we’ve been above 2% for many years,” Goolsbee said. “We stopped making progress last year, and now in the short run it’s getting a little worse. So I think it was close to what was expected. But what was expected isn’t that favorable. We’ve got to deal with this affordability issue.”
