MONDAY, May 26th
MEMORIAL DAY All Markets Closed
TUESDAY, May 27th
Consumer confidence sank to a 16-year low in May, falling to 57.2% from a reading of 62.8% in April. Consumers' assessments of current and future economic conditions continue to deteriorate sharply under surging inflation expectations. Such low confidence levels along with other burdens consumers are shouldering could severely impact spending thus slowing economic growth even further.
New home sales increased 3.3% in April to a pace of 526,000, better than an expected decline to a rate of 522,000. However, sales in March were revised sharply lower to 509,000 from 526,000 in the first estimate. April's figures will be subject to revision as well because new home sales track the number of signed contracts and do not reflect the number of cancellations, which have been high because of tighter credit and tougher standards for loans. Even with the apparent rebound in April, new home sales remain quite weak. The market is showing some signs of stabilizing though in reduced inventory levels and firmer prices.
The Case-Shiller home price index fell 14.1% in the first quarter from the same quarter one year ago. It was the steepest drop in home prices since the inception of the index in 1988. The largest declines were in the Las Vegas, Miami and Phoenix markets.
WEDNESDAY, May 28th
The MBA mortgage applications index fell 4.6% to 593.3% for the week ending May 23. Total mortgage application volume is down 6.8% from its year ago level. The purchase index edged 0.1% higher as the refinance index tumbled 8.9%. Purchase applications remain 17.4% below its year ago level indicating sluggish home buying demand while refinancing activity continues to be hampered by interest rates.
Durable goods orders fell 0.5% in April compared to expectations for a 2.0% decline. The gain was led by demand for electrical equipment though orders for primary metals, machinery and defense goods also increased strongly. Orders for non-defense capital goods excluding aircraft, a proxy for business investment rose 4.2% last month, signally a pocket of strength in otherwise sluggish economic conditions.
A Fed official hinted, in prepared remarks today that a rate hike may not be far off. Indeed, fed funds futures traders are pricing in a 73% chance of a quarter point bump in December. The economic data in the meantime will help determine the timing of policy reversal.
THURSDAY, May 29th
Growth was a tad better in the first quarter according to the preliminary estimate of GDP. The economy grew at a 0.9% pace in Q1 compared to advance estimate of 0.6% growth. A measure of economy-wide inflation remained unchanged at 2.6% last quarter.
Jobless claims rose 4k to 372k for the week ending May 24. Claims levels are consistent with a high pace of layoffs however they are not accelerating. Also, claims data suggest that job creation remains weak
Mortgage rates drifted higher this week over increasing expectations that the Fed may need to raise rates sooner rather than later to tame inflationary pressures. Also, recent economic data suggests the economy is not as weak as anticipated by the financial markets. 30-year fixed rate mortgages averaged 6.08% this week compared to 5.98% last week according to Freddie Mac's mortgage market survey.
FRIDAY, May 30th
Personal income rose 0.2% in April led strong transfer payments such as rental income. Wage and salary growth actually declined on the month. Consumer spending increased 0.2% last month, as expected, but has declined sharply in the last three months reflecting slower economic conditions. The core PCE price index, a favorite inflation measure for the Fed, rose a mild 0.1% on the month and 2.1% on the year, which is just over the Fed’s implicit target for core inflation.
Stock Market Close for the Week
Index Latest A Week Ago Change
DJIA 12638.32 12479.63 +158.69 or +1.27%
NASDAQ 2522.66 2444.67 +77.99 or +3.19%
WEEK IN ADVANCE
With the Fed presumably on hold, the economic data coming in a bit better than expected and inflationary pressure in play interest rates are facing upward pressure in the weeks ahead. The economic story has largely been better but still weak which should keep a lid on rates climbing too far, too fast.
Sources: IBC' s Money Fund Report; Bank Rate Monitor; Federal Home Loan Bank of San Francisco
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