Morning Report: Inflation cooling but still close to highs.

Posted on May 12, 2022 by Brent Nyitray

Vital Statistics:

 LastChange
S&P futures3,910-20.25
Oil (WTI)105.910.19
10 year government bond yield 2.86%
30 year fixed rate mortgage 5.51%

Stocks are lower again on Fed fears. Bonds and MBS are up.

It looks like the “risk off” trade is beginning to positively affect bonds. Bonds are rallying, however MBS are lagging (as usual). The S&P 500 is within spitting distance of official bear market territory, which would be 20% off the high set in January. The Nasdaq entered that territory long ago.

Inflation at the wholesale level rose 0.5% in April, according to the Producer Price Index. This is a deceleration from the 1.5% we saw in March and 1.1% we saw in February. On a year-over-year basis, the PPI is up 11%. The core rate rose 0.6%, which was a deceleration from February and March. It is up 6.9% on a year-over-year basis. While the deceleration in month-over-month increases is welcome, the Fed is probably going to stick to is schedule and hike rates another 50 basis points at the June meeting.

Wages are rising, however they are not keeping up with inflation. Real (inflation-adjusted) wages fell 0.1% month-over-month in April, according to BLS. On a year-over-year basis, real wages fell 2.6%. Separately, initial jobless claims rose 203,000 last week. Overall the labor market is exceptionally strong, although the big question comes out to where inflation plateaus. That will determine whether we get the dreaded wage-price spiral that the Fed is trying to prevent. The low unemployment rate gives the Fed some breathing room to raise rates more aggressively.

With rising rates, ARMs are making a comeback. Last week the 30 year fixed rate mortgage was 5.53%, while 5/1 ARMS were 4.47%. “Despite a slow start to this year’s spring home buying season, prospective buyers are showing some resiliency to higher rates. Purchase activity has now increased for two straight weeks,” said Joel Kan, an MBA economist, in a release. “More borrowers continue to utilize ARMs to combat higher rates. The share of ARMs increased to 11% of overall loans and to 19% by dollar volume.”

ATTOM reported that 45% of mortgaged residential properties were considered equity rich, compared to 32% a year ago. “Homeowners continue to benefit from rising home prices,” said Rick Sharga, executive vice president of market intelligence for ATTOM. “Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market.”

Filed under: Economy |

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21 Responses

  1. Let the mutherfuker burn!, on May 12, 2022 at 10:27 am said:

    This story makes me laugh and laugh.

    https://www.axios.com/2022/05/12/gop-panics-pa-senate-wild-card-kathy-barnette

    We have to wait until the second half of the 7th bullet point to get to the real lede of the article:

    but being unmanageable for McConnell should he return as Senate majority leader next year.

    The Republican leadership absolutely despises their voters. Has there ever been anything like it?

    Like

    Reply
    • Kevin S. Willis, on May 12, 2022 at 1:38 pm said:

      The Republican leadership is retarded. Here’s an important bullet point:

      Barnette is also the uncommon Black Republican candidate.

      But no, they’d rather have a celebrity doctor who I feel fairly confident will be one of those guys who comes out of the senate way richer than he went in, and that that’s the point to his candidacy.

      At the same time, a cursory review of her Twitter account, @Kathy4Truth, turned up tweets like this one: “Just confronted a Muslim today.”

      Uh-huh.

      he joins Missouri Senate candidate Eric Greitens

      Guilt by association with someone not even really associated with her. ALWAYS COMPELLING.

      They not only create the potential of blowing winnable seats but being unmanageable for McConnell should he return as Senate majority leader next year.

      Good. Why should I be worried if Mitch has a tough time “managing” the senate?

      Neither rival nor their backers have put serious money on TV to promote her history of comments that would ordinarily disqualify a candidate in a general election, if not a Republican primary.

      Uh-huh. Like “Its not a choice, it’s a life” and “I confronted a Muslim today”. What else do they have? Certainly the reporter could have done some harder hitting Twitter investigation to find out. And maybe mention it in the article.

      Best case: She’s elected and ends up a thorn in the side of Senate leadership. She’s already signaled hesitancy about backing McConnell as the Republican leader.

      Not seeing the problem here.

      Ric Grenell, a Trump ally who’s also endorsed Oz, has been spreading around a video of Barnette’s past comments about “white racism.”

      Which is the exact opposite of what this article is implying, which they have to know, but they are letting the implication sit there. So basically they are lying. Journalism!

      Like

      Reply
  2. Let the mutherfuker burn!, on May 12, 2022 at 3:02 pm said:

    Why did all these companies only start overcharging when Biden came into office?

    Like

    Reply
  3. jnc4p, on May 12, 2022 at 6:46 pm said:

    Scott, you might appreciate this:

    Like

    Reply
  6. Let the mutherfuker burn!, on May 13, 2022 at 8:53 am said:

    I have no idea about this broad’s bona fides but this is savage.

    Like

    Reply

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