Bonds came into the domestic session in modestly stronger territory after an uneventful night of narrow, sideways trading. They’re logically selling off following the much stronger Durable Goods reading. This isn’t exactly a top tier market mover, but this is a fairly resounding ‘beat.’
MBS down 8 bps. Stocks up 13.08. Because people just keep buying stuff.
Durable Goods = 1.7 vs -1.0 f’cast [1.1 prev]
Durables, nondefense, excluding aircraft = 0.7 vs 0.0 f’cast
New Home Sales = 763k vs 675k f’cast [683k prev]
Consumer Confidence = 109.7 vs 104.0 f’cast [102.5 prev]
Separately, the Case-Shiller Home Price Index reported an annual decrease of 0.2% in April. We did see some big declines in certain MSAs: -12.4% in Seattle, -11% in San Francisco, -6.6% in Las Vegas, -5.6% in San Diego, -6.1% in Phoenix.
The median new home price fell 7.6% on a YOY basis to 416,300. The average sales price fell 6.6% to 487,000. It looks like the affordability issue has caused builders to focus more on lower-priced properties than luxury houses.
Consumer confidence improved in June. The present situation index (how things actually are right now) is at 155 while the expectations index is 79. The chart below is more or less the average of the two. Inflationary expectations fell to 6% (still way above what the Fed would like to see), however this was the lowest since December 2020.
ECB announced today they plan to hike rates in July. Also likely to keep rates higher and longer.
The US Has had to issue a lot of shorter term Treasuries as a result of the debt ceiling increase. Which pose a whole slew of challenges for the bond market. Fortunately, absorption has been pretty good so far.
Forget “love.” Today data hurts. Durable Goods fired a warning shot at 8:30am. Consumer Confidence and New Home Sales finished the job at 10am. With that, a modestly stronger start gave way to a logical sell-off of moderate proportions. By 11:30am, the losses had run their course and bonds drifted sideways for the rest of the session–perfectly inside the prevailing range.
MBS ended down 17 bps. Stocks up by a whopping 50 points.