Morning Report: Wholesale inflation falls

Vital Statistics:

 LastChange
S&P futures3,9599.50
Oil (WTI)88.431.16
10 year government bond yield 3.43%
30 year fixed rate mortgage 5.97%

Stocks are higher this morning after yesterday’s bloodbath. Bonds and MBS are down small.

Inflation at the wholesale level fell 0.1% MOM and rose 8.7% YOY. The decline was driven primarily by a big decrease in energy prices. Ex-food and energy, the monthly index rose 0.2% MOM and 8.1% YOY. The report was more or less in line with Street expectations, so we aren’t seeing any sort of major reaction in the markets.

The encouraging thing is that the monthly core numbers (ex food, energy and trade services) is on a general downtrend over the past year. Will this have an effect on the Fed’s plans next week? Nope.

The Fed Funds futures now see a 70% chance of a 75 basis point hike and a 30% chance of a 100 basis point hike.

The effect on the yield curve is much more pronounced at the short end. The 2 year bond yield has picked up 23 basis points in yield over the past two days, while the 10 year is up about 8 basis points. The yield curve continues to invert, and the spread between the 2 year and the 10 year is now negative 36 basis points. The amount of tightening that has yet to hit the market is piling up. IMO, this is going to increase the chance for a hard landing.

Luckily since mortgage rates are more influenced by longer-term rates we aren’t seeing much of an impact on mortgages, at least not yet.

Mortgage applications fell 1.2% last week as purchases increased 0.2% and refis fell by 4%. Last week was short with the Labor Day holiday. “The 30-year fixed mortgage rate hit the six percent mark for the first time since 2008 – rising to 6.01 percent – which is essentially double what it was a year ago,” said Joel Kan, MBA Associate Vice President of Economic and Industry Forecasting. “Higher mortgage rates have pushed refinance activity down more than 80 percent from last year and have contributed to more homebuyers staying on the sidelines. Government loans, which tend to be favored by first-time buyers, bucked this trend and increased over the week, driven mainly by VA and USDA lending activity.”

Median incomes fell about 2.9% to $67,251 in 2020, according to the Census Bureau. I’m sure the pandemic wreaked havoc on the numbers, so I would put an asterisk next to this one.

42 Responses

  1. “Unvaxxed”? Ew – gross!

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  2. Still fascinated as to why James Taylor sang at Biden’s IRA show yesterday. Still wondering why John Kerry had James Taylor sing in France a couple of years ago when he was SoS.

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    • The left is criminalizing opposition

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    • Sounds like they had a warrant. Same thing with the 30+ people tied to Bannon.

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      • jnc:

        Sounds like they had a warrant.

        I don’t doubt it, but the question is why? Is it a legitimate reason? I no longer give them the benefit of the doubt, and with regard to anyone associated with Trump, my default assumption is that it isn’t.

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        • i will assume the warrant is bullshit unless i hear of a valid reason.

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        • It’s easy enough to find:

          “Mike Lindell, a prominent promoter of 2020 election misinformation, was served with a search warrant, and his cellphone was seized, by F.B.I. agents who questioned him about his ties to a Colorado county clerk who is accused of tampering with voting machines, Mr. Lindell said.

          Tina Peters, the county clerk in Mesa County, Colo., is under indictment on state charges related to a scheme to download data from election equipment after the 2020 presidential contest. Ms. Peters has pleaded not guilty to the charges.”

          The question I always try to ask myself here is what would be my reaction if it was someone tied to HRC who was accused of doing the same things.

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        • jnc:

          The question I always try to ask myself here is what would be my reaction if it was someone tied to HRC who was accused of doing the same things.

          Doing what things? Your excerpt doesn’t tell us that Lindell is accused of doing anything at all, but only of “having ties” to someone.

          Besides which, the question you always try to ask yourself is informative only under the assumption that the accuser is a non-partisan, objective source. For example, if the NYT accused Barack Obama of a crime, I would react quite differently than if the NYT accused Donald Trump of a crime. But the difference in my reaction would have nothing to do with either Obama or Trump or my thoughts about them, and everything to do with what I know about the NYT.

          The days of me assuming that the FBI or the DOJ is a non-partisan, objective investigator are all over.

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        • In general I’d think it’s suspicious and probably a bad idea whether Trump or Hillary. Suspicious because of the incentives to be partisan in such situations, and the long history of clearly partisan motivations behind such things. Thinking it’s probably a bad idea because of the precedent of using such things as partisan tools will just lead to more such pursuits with even less substance in the future.

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      • This is about making anyone who is even considering backing Trump in 2024 to think again.

        It is a brushback pitch.

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  3. I wonder how much tax bracket creep we’ll see from inflation this year.

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  4. Drop by drop the DoJ is acknowledging that Trump declassified the documents in question but they still need to keep them because, reasons.

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    • I just wonder how they do not know what documents he has? Presumably it went to him before he declassified it, right? Then isn’t there some sort of log book about who checked out a document?

      The answer is obviously yes so all this is bullshit.

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      • He probably violated the Presidential Records Act, but it remains to be determined if the more sensational charges around the Espionage Act hold water.

        As always with Trump, they can’t stick to what’s provable. They always have to throw in some extra stuff.

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        • jnc:

          As always with Trump, they can’t stick to what’s provable.

          That’s because the Presidential Records Act is not a criminal statue, and so does not serve their purposes of accusing Trump of committing a crime.

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    • I want to know why the Intelligence Community would have a “compelling need” to understand “why and how” the docs were declassified. The IC works for the president, not vice-versa.

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  5. This should be good right before the election:

    “Passenger trains, grain shipments to be stopped, as railway strike looms

    Labor Secretary Marty Walsh convenes negotiators in Washington to resolve impasse that could devastate nation’s transportation capacity

    By Jeff Stein and Lauren Kaori Gurley

    Updated September 14, 2022 at 3:46 p.m. EDT”

    https://www.washingtonpost.com/us-policy/2022/09/14/congress-freight-rail-strike/

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  6. Anyone want to bet these two clowns win an award for this surely god-awful TV show, despite the reviews?

    https://www.dailywire.com/news/tv-review-says-hillary-clinton-series-lacks-depth-personality-and-more

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  7. Sharing the wealth continues:

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