CHM Blog

Daily Market Analysis July 26, 2022

July 26th, 2022 9:28 AM by Richard Sardella MLO.100007700/NMLS 233568

Daily Market Analysis

The FOMC meeting getting underway now. What will the Fed do? The wide expectation is an increase of 75 bps in the FF rate. If the FOMC did anything else it would shock the system and markets, but there is still some that build an argument that the Fed should not increase now, that inflation is going back in the bottle. In an article in the WSJ this morning by Donald Luskin he builds the case that with M2 money supply declining (currency in circulation plus liquid bank and money-market fund balances) the Fed should just sit tight now, when the M2 money supply declines inflation falls with it; a Milton Friedman belief that inflation is still a monetary phenomenon. An interesting article on the editorial page today.

The 10 yr. note started today -6 bps after increasing 3 bps yesterday: MBS prices at the start +11 bps from yesterday. Stock indexes at 8:30 am ET weaker on Wal-Mart warning of slowing spending as food and gas prices increasingly squeezing consumers.

Powell faces a conundrum on what to do but will do 75 bps tomorrow. The dilemma for the Fed is that readings on inflation drivers -- such as wages -- are elevated enough to sustain pressure on policy makers to stay hawkish, even as measures of the broader economy such as last week’s business-activity data signal the US is heading for a severe economic slowdown. Inflation has likely topped at 9.1% for May CPI, that has grown to be the current consensus; also, there is increasing conviction the Fed will not increase rates again this year. Markets will get Powell and the FOMC policy statement tomorrow afternoon that may clear the air, although with the inflation debate raging it won’t be the final word. The Fed has two CPI reports before the Sept meeting: July, and August.

What about the definition of recession, two consecutive quarters of declining GDP? Janet Yellen poopooed that yesterday. Q1 GDP -1.6%, Q2 advance report comes Thursday with the release teetering between another contraction and a slight improvement on the positive side.

May Case/Shiller home price index at 9 am, +1.5% and year/year expected +21.0% increased 20.5%.

At 9:30 am the DJIA opened -81, NASDAQ -71, S&P -16. 10 yr. at 9:30 am 2.74% -7 bps. FNMA 4.5 30 yr. coupon at 9:30 am +17 bps and +30 bps from 9:30 am yesterday.

At 10 am July consumer confidence index expected at 96.8 declined to 95.7 and June revised to 98.4 from 98.7. June new home sales at 590K with consensus at 664K and May revised to 642K from 696K.

PRICES @ 10:00 AM

10 yr note: 2.73% -8 bp

5 yr note: 2.81% -8 bp

2 Yr note: 3.00% -3 bp

30 yr bond: 2.98% -5 bp

Libor Rates: 1 mo 3.00%; 3 mo 2.769%; 6 mo 3.285%; 1 yr 3.775% (7/25/22)

30 yr FNMA 5.0: @ 10:00 am +2 bp (+3 bp from 9:30 am yesterday)

30 yr FNMA 4.5: 100.83 +6 bp (+ 16 bp from 9:30 am yesterday)

30 yr GNMA 4.0: 100.27 +13 bp (+19 bp from 9:30 am yesterday)

Dollar/Yuan: $6.7605 +$0.0095

Dollar/Yen: 136.34 -0.34 yen

Dollar/Euro: $1.0147 -$0.0073

Dollar Index: 107.04 +0.55

Gold: $1718.30 -$0.80

Bitcoin: 20,961 -1205

Crude Oil: $97.87 +$1.17

DJIA: 31,848 -140

NASDAQ: 11,656 -126

S&P 500: 3941 -26

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 July 26th, 2022 9:28 AM



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