CHM Blog

Daily Market Analysis April 29, 2022

April 29th, 2022 10:09 AM by Richard Sardella MLO.100007700/NMLS 233568


Daily Market Analysis

We waited all week for the 8:30 am ET data this morning, primarily the PCE inflation data. PCE in March expected +0.9%, as released +0.9%; yr/yr expected +6.8%, as reported +6.6%. Core PPI expected +0.3% and was +0.3%, yr/yr forecasts +5.3%, as reported +5.2%. Two weeks ago, March CPI data reflected moderation in inflation at the consumer level, CPI increased but not as much as estimates, the reaction pushed the 10 yr yield lower and MBS prices higher. Now we get the same deviations as CPI, up but not quite as much as expected. Is inflation slowing its increase? The reaction to the data at 8:30 am was met with selling as March personal income was stronger than thought, +0.5% with forecasts of +0.4%; Feb revised from +0.5% to +0.7%. Personal spending jumped 1.1% with expectations at +0.6%, Feb spending revised from +0.2% to +0.6%.

The inflation data likely reaffirm Fed officials’ calls to hike interest rates by a more aggressive half-point at their meeting next week. The question now is what will the FOMC policy statement and Powell’s press conference next Wednesday imply? Inflation is still increasing but the pace is easing, will that change the Fed’s very aggressive tightening frm 50 bp increases in the FF rate over the next three FOMC meetings as markets presently expect?

The initial reaction sent MBS prices lower. Even with somewhat better reads that forecasts PCE up 0.9%, it is a big jump frm February; yr/yr at +6.6% is the most since 1982. The figures show that even as consumer prices continue to grow at the fastest rate in decades, demand is strong enough to outpace inflation. Add the increase in Q1 employment cost index and another look at inflation; Q1 +1.4% frm Q4 2021 and the third consecutive quarter ECI has increased more than 1.0%. Labor cost pressures are also adding to inflation as employers charge more to their of customers to offset higher pay. Pay increases for all workers increased 4.5% for the 12-month period ending in March 2022 versus 2.6% in March 2021. Wages and salaries increased 4.7% for the 12-month period ending March 2022 versus 2.7% for March 2021. Benefit costs increased 4.1% for the 12-month period ending in March 2022 versus 2.5% for March 2021 Compensation costs for private industry workers increased 4.8% for the 12-month period ending in March 2022 versus 2.8% for March 2021. Wages and salaries increased 5.0% for the 12-month period ending March 2022 versus 3.0% for March 2021. Benefit costs increased 4.1% for the 12-month period ending in March 2022 versus 2.5% for March 2021.

At 9:30 am the DJIA opened -107, NASDAQ -156, S&P -38. 10 yr at 9:30 am 2.91% +10 bps. FNMA 4.5 30 yr coupon at 9:30 am -59 bps frm yesterday’s close and -37 bps frm 9:30 am yesterday.

At 9:45 am the April Chicago purchasing mgrs. index was expected at 61.3 frm 62.9 in Feb; the index dropped to 56.4 the lowest since Feb. The reaction pulled the 10 back to 2.88% frm 2.91% and MBS prices from -59 bps to -34 bps.

At 10 am the final April U. of Michigan/Wells Fargo consumer sentiment index expected at 65.6 from 65.7, as reported 65.2.

PRICES @ 10:00 AM

10 yr note: 2.86% +5 bp

5 yr note: 2.90% +6 bp

2 Yr note: 2.69% +12 bp

30 yr bond: 2.92% +2 bp

Libor Rates: 1 mo 0.800%; 3 mo 1.286%; 6 mo 1.848%; 1 yr 2.549% (4/28/22)

30 yr FNMA 4.0: @9:30 99.25 -59 bp @ 10:00 am 99.63 -22 bp

30 yr FNMA 4.5: @9:30 101.44 -59 bp @10:00 am 101.80 -23 bp

30 yr GNMA 4.0: @9:30 100.00 -50 bp @10:00 am 100.34 -16 bp

Dollar/Yuan: $6.6063 -$0.0200

Dollar/Yen: 130.11 -0.71 yen

Dollar/Euro: $1.0534 +$0.0034

Dollar Index: 103.28 -0.34

Gold: $1905.70 +$14.40

Bitcoin: 39,279 -648

Crude Oil: $106.35 +$0.99

DJIA: 33,851 -65

NASDAQ: 12,825 -46

S&P 500: 4260 -27

About Richard Sardella

Richard Sardella has been actively managing and providing services in the mortgage industry for over 30 years. Richard serves on the board of directors as President of Colorado Home Mortgages Inc.

About This Report And Disclosure Information

All information furnished has been forwarded to you and is provided by thetbwsgroup only for informational purposes. Forecasting shall be considered as events which may be expected but not guaranteed. Neither the forwarding party and/or company nor thetbwsgroup assume any responsibility to any person who relies on information or forecasting contained in this report and disclaims all liability in respect to decisions or actions, or lack thereof based on any or all of the contents of this report.

MLO of record MLO.100007700 / NMLS#233568 / CHM NMLS#127716.

Posted by Richard Sardella MLO.100007700/NMLS 233568 on April 29th, 2022 10:09 AM

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