Stocks are lower this morning as chip stocks sell off. Bonds and MBS are up.
Inflation at the wholesale level fell 0.3% MOM and rose 5.5% YOY. The Producer Price Index excluding food and energy rose 0.2% MOM and 4.7% YOY. These numbers were below Street expectations. Goods inflation fell 1.4% MOM and rose 7.9% YOY. Services inflation rose 0.2% MOM and 4.6% YOY.
The ceasefire-driven decline in energy prices accounted for the monthly drop in the index. Given that hostilities are back on the table, the Fed is unlikely to be dissuaded from its tightening bias. The July Fed Funds futures backed off July hike bets slightly, which are now around 10%.
In terms of housing, construction rose 3.5% YOY. Lumber and plywood were up 6.1% and 8.2% respectively.
Retail Sales increased 0.2% MOM and 6.7% YOY, according to the Census Bureau. If you strip out vehicles and gas, they rose 0.4% MOM and 5.7% YOY. These numbers are not adjusted for inflation, so it means that retail sales were up about 3% YOY in real terms.
In other economic news, initial jobless claims slipped to 208k last week and the Philly Fed index spiked higher.
Economic activity increased at a “slight to moderate” pace in most districts over the past 6 weeks, according to the Fed’s Beige Book. Consumer spending edged up, while employment conditions deteriorated slightly. Skilled labor is still hard to find for many employers.
Price increased moderately during the period, although growth rates were similar to or slower than the previous period. The report noted that customers were becoming more sensitive to price hikes and many were unable to pass on input price increases fully to their customers.
Mortgage credit availability decreased in June, according to the MBA. Lenders saw less activity in government loans, while non-QM continued to increase. “Mortgage credit availability decreased in June to its lowest level since December 2025,” said Joel Kan, CMB, MBA’s Vice President and Deputy Chief Economist. “A contraction in government loan programs accounted for a significant share of the June decrease, as lenders pulled back on FHA and VA streamline refinance loan programs, particularly those for high LTV and low credit score borrowers. The jumbo index increased slightly, supported by new non-QM programs, which is consistent with other market data showing a larger non-QM share of originations.”
