Vital Statistics:
| Last | Change | |
| S&P futures | 4,107 | -26.5 |
| Oil (WTI) | 93.81 | -4.80 |
| 10 year government bond yield | 2.60% | |
| 30 year fixed rate mortgage | 5.30% |
Stocks are lower this morning as earnings continue to come in. Bonds and MBS are flat.
We have a big week of data coming up, with the ISM data, job openings, and the employment situation report on Friday. Note that the ADP Employment Report is on hold while ADP works on their model.
Interest rates continue to fall, which is triggering margin calls for originators. This is not just a US-driven phenomenon. The German Bund (a proxy for European interest rates) yields 0.77%, which is down 100 basis points from late June. Global interest rates tend to correlate, and the European economy is weakening.
I sat down with Mike Savino of National Mortgage Professional and did a podcast on the state of the economy. You can access it here.
The manufacturing economy decelerated in July, according to the ISM Manufacturing Index. New Orders and production declined, which shows the economy slowing. On the bright side, prices are beginning to moderate. From the report: “The month-over-month decline of 18.5 percentage points is the fourth biggest decline on record (since 1948) and the steepest since a 22.1-percentage point drop in June 2010. “The slowing in price increases is being driven by (1) volatility in the energy markets, (2) softening in the copper, steel, aluminum and corrugate markets and (3) a significant decrease in chemical demand. Notably, 21.5 percent of respondents reported paying lower prices in July, compared to 8.3 percent in June,” says Fiore. A Prices Index above 52.6 percent, over time, is generally consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.”
Much of this is due to falling commodity prices, which is partially due to the dollar. The US dollar has been on a tear lately, and since commodities are quoted in dollars, when the dollar rises, commodity prices fall. That said, the Fed will breathe a sigh of relief as one of the big components of our current inflation eases.
Construction spending fell 1.1% MOM in June, according to the Census Bureau. Residential construction was down 1.6% MOM but up 15.4% YOY. I don’t think the construction spending data is inflation-adjusted so that would account for the big YOY increase despite falling housing start.
Filed under: Economy |
All Things in Moderation 
Worth noting:
https://punchbowl.news/archive/8-1-22-punchbowl-news-am/
LikeLike
Why is Manchin going along with this?
LikeLike
This may have something to do with it:
“Democrats’ side deal with Manchin would speed up projects, West Virginia gas
Sen. Joe Manchin III and Democratic leaders forged a deal to expand energy infrastructure, but it would need GOP approval
By Jeff Stein and Tony Romm
Updated August 1, 2022 at 5:51 p.m. EDT”
https://www.washingtonpost.com/us-policy/2022/08/01/manchin-pipeline-drilling-permit/
LikeLike
The WaPo comments peanut gallery seems upset about the deal.
LikeLike
jnc:
Biden vowed never to raise taxes on any Americans making less than $400,000 annually…
Republicans, as expected, jumped all over this. “The mislabeled ‘Inflation Reduction Act’ will do nothing to bring the economy out of stagflation and recession, but it will raise billions of dollars in taxes on Americans making less than $400,000,” Sen. Mike Crapo (Idaho), the top Republican on the Finance Committee, said in bashing the Democratic plan.
A good indication of how completely perverted our politics are, when the one thing both sides seem to agree on is that forcing a tiny minority of citizens to pay for massive government expenditures is less objectionable than spreading that cost among all the people.
LikeLiked by 1 person
Well, hopefully some of them also just object to the massive spending period.
LikeLike