MIG Market Watch, May 16th, 2022
Posted by : Admin
Market Comment
Mortgage bond prices finished the week slightly higher which helped rates improve. Trading was very volatile with large movements throughout the week. Inflation readings remained historically elevated but were mixed in comparison to expectations. The Consumer Price Index rose 0.3% vs 0.2%. The core rose 0.6% vs 0.5%. The year over year core rose 6.2% vs 6%. Producer prices rose 0.5% as expected. The core rose 0.4% vs 0.6%. Year over year core prices rose 8.8% vs 8.9%. Consumer sentiment was 59.1 vs 63. Stocks experienced wild swings with heavy selling pressure most of the week. The Fed continued their daily MBS reinvestments which helped rates improve slightly. Mortgage interest rates finished the week better by approximately 1/4 of a discount point.
Looking Ahead
| Economic Indicator | Release Date & Time | Consensus Estimate | Analysis |
| Retail Sales | Tuesday, May 17, 8:30 am, et |
Up 0.7% | Important. A measure of consumer demand. A smaller than expected increase may lead to lower mortgage rates. |
| Industrial Production | Tuesday, May 17, 9:15 am, et |
Up 0.4% | Important. A measure of manufacturing sector strength. A lower than expected increase may lead to lower rates. |
| Capacity Utilization | Tuesday, May 17, 9:15 am, et |
78.6% | Important. A figure above 85% is viewed as inflationary. Weaker figure may lead to lower rates. |
| Business Inventories | Tuesday, May 17, 10:00 am, et |
Up 1.8% | Low importance. An indication of stored-up capacity. A significantly larger increase may lead to lower rates. |
| NAHB Housing Index | Tuesday, May 17, 10:00 am, et |
76 | Moderately Important. A measure of single-family housing. Weakness may lead to lower mortgage rates. |
| Housing Starts | Wednesday, May 18, 8:30 am, et |
1.783M | Important. A measure of housing sector strength. Weakness may lead to lower rates. |
| Philadelphia Fed Survey | Thursday, May 19, 10:00 am, et |
17.2 | Moderately important. A survey of business conditions in the Northeast. Weakness may lead to lower rates. |
| Leading Economic Indicators | Thursday, May 19, 10:00 am, et |
Up 0.3% | Important. An indication of future economic activity. A smaller increase may lead to lower rates. |
Powell 2nd Term
The Senate voted last week to give Chairman Powell a second term as the head of the Federal Open Market Committee. The Committee faces significant challenges ahead as the economy rebounds from the pandemic amid escalating inflation fears and global instability. The latest inflation readings show prices exceeded 8% on a yearly basis. These are levels not seen since the early 1980s. Inflation was near 14.5 percent, and unemployment was over 7.5 percent during that time.
The Fed stated last week, “Promoting financial stability is a key element in meeting the Federal Reserve’s dual mandate for monetary policy regarding full employment and stable prices. In an unstable financial system, adverse events are more likely to result in severe financial stress and disrupt the flow of credit, leading to high unemployment and great financial hardship.” Most senators (80-19 vote) believe that Powell’s continuation as head will provide some of the stability needed during these uncertain times. All agree that there are many challenges ahead.
