Morning Report: Strong retail sales

Vital Statistics:

S&P futures4,130-15.50
Oil (WTI)78.38-0.78
10 year government bond yield 3.75%
30 year fixed rate mortgage 6.44%

Stocks are lower this morning after the strong retail sales number. Bonds and MBS are down.

Retail sales rose 3% month-over-month and 6.4% year-over-year according to the Census Department. This was well above expectations. Excluding vehicles and gas, sales rose 2.6% MOM. Note these numbers are not adjusted for inflation, so retail sales were flat YOY on an inflation-adjusted basis.

Homebuilder confidence improved in February, according to the NAHB. “With the largest monthly increase for builder sentiment since June 2013, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” said NAHB Chairman Alicia Huey, a custom home builder and developer from Birmingham, Ala. “The nation continues to face a sizeable housing shortage that can only be closed by building more affordable, attainable housing. However, the two monthly gains for the HMI at the start of 2023 match the cautious optimism noted by the large number of builders at the recent International Builders’ Show in Las Vegas, who reported a better start to the year than expected last fall.”

“While the HMI remains below the breakeven level of 50, the increase from 31 to 42 from December to February is a positive sign for the market,” said NAHB Chief Economist Robert Dietz. “Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle. And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.”And while builders continue to offer a variety of incentives to attract buyers during this housing downturn, recent data indicate that the housing market is showing signs of stabilizing off a cyclical low

Mortgage applications fell 7.7% last week as purchases fell 5.5% and refis fell 12.5%. “Mortgage rates increased across the board last week, pushed higher by market expectations that inflation will persist, thus requiring the Federal Reserve to keep monetary policy restrictive for a longer time. After five straight weeks of decreases, the 30-year fixed rate increased by 21 basis points to 6.39 percent,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Mortgage applications decreased for the second time in three weeks because of these higher rates. Refinance borrowers, both rate/term and cash-out, remain on the sidelines as current rates provide little financial incentive to act.”

Added Kan, “Purchase applications dropped to their lowest level since the beginning of this year and were more than 40 percent lower than a year ago. Potential buyers remain quite sensitive to the current level of mortgage rates, which are more than two percentage points above last year’s levels and have significantly reduced buyers’ purchasing power.”

Inflationary expectations fell to 2.9%, according to the Atlanta Fed. This comports with the University of Michigan data. That said, we are still well above the 2% target for the Fed.

Industrial production was flat in January, according to the Federal Reserve. Manufacturing output rose 1%. Capacity Utilization fell to 78.3%.

2 Responses

  1. Perfect ending:

    “Sen. Dianne Feinstein (D-CA) said she did not know her office released a statement saying she will not seek reelection in 2024.

    “I am announcing today I will not run for reelection in 2024 but intend to accomplish as much for California as I can through the end of next year when my term ends,” Feinstein, 89, said in the statement.

    Later on Tuesday, reporters at the Capitol asked her about the announcement.

    “I haven’t made that decision,” she said, according to Savannah Behrman of the National Journal. “I haven’t released anything.”

    A Feinstein staffer then told her, “We put out the statement.”

    “You put out the statement?” the senator replied, seemingly surprised.”


Be kind, show respect, and all will be right with the world.

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: