MIG Market Watch, May 23rd, 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. Stocks struggled at times. The DOW closed down 1164 points Wednesday. There was some flight to safety buying of MBSs as a result. The data was mixed. Retail sales rose 0.9% vs 1.1%. Industrial production rose 1.1% vs 0.6%. Capacity use was 79% vs 78.6%. Business inventories rose 2% vs 1.9%. NAHB housing was 69 vs 74. Housing starts were 1724K vs 1780K. Weekly jobless claims were 218K vs 199K. Philadelphia Fed was 2.6 vs 14.0. Existing home sales were 5.61M vs 5.68M. LEI fell 0.3% vs a 0.1% increase. 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 |
| New Home Sales | Tuesday, May 24, 10:00 am, et |
758K | Important. An indication of economic strength and credit demand. Weakness may lead to lower rates. |
| Durable Goods Orders | Wednesday, May 25, 8:30 am, et |
Up 0.5% | Important. An indication of the demand for “big ticket” items. Weakness may lead to lower rates. |
| Fed Minutes | Wednesday, May 25, 2:00 pm, et |
None | Important. Details of the last Fed meeting will be thoroughly analyzed. |
| Q1 GDP | Thursday, May 26, 8:30 am, et |
Down 1.4% | Very important. The aggregate measure of US economic production. Weakness may lead to lower rates. |
| Weekly Jobless Claims | Thursday, May 26, 8:30 am, et |
220K | Important. An indication of employment. Higher claims may result in lower rates. |
| Personal Income and Outlays | Friday, May 27, 8:30 am, et |
Up 0.6%, Up 0.7% |
Important. A measure of consumers’ ability to spend. Weakness may lead to lower mortgage rates. |
| PCE Core Inflation | Friday, May 27, 8:30 am, et |
Up 0.3% | Important. A measure of price increases for all domestic personal consumption. Weaker figure may help rates improve. |
| U of Michigan Consumer Sentiment | Friday, May 27, 10:00 am, et |
59.1 | Important. An indication of consumers’ willingness to spend. Weakness may lead to lower mortgage rates. |
Fuel Price Pressures
Rising fuel prices continue to pressure consumers and businesses which impacts the entire economy. Every item that is shipped or trucked is impacted by the cost of diesel. The US Energy Information Administration reported May 16th that regular gasoline prices averaged $4.49 per gallon. The West Coast had the highest prices at $5.36 per gallon. U.S. On-Highway Diesel Fuel Prices averaged $5.61 per gallon while many areas peaked over $6 per gallon.
The price of gasoline is composed of 60% crude oil, 17% refining, 11% distribution and marketing, and 12% taxes. The diesel breakdown is slightly different at 49% crude oil, 28% refining, 12% distributions and marketing, and 11% taxes.
Many analysts predict additional increases as we head into Memorial Day and the summer. Volatility is likely over the next few months as the recent runup in prices has yet to put a significant damper on demand.
