Good Monday morning from your Hometown Lender,
A good start to the week and month.
Bonds are improving on some weaker data this a.m. (both ISM Manufacturing and Construction Spending came in lower than expected) and that the ECB is expected to cut rates this Thursday. Over the last few weeks there has been a change though in the correlation between stocks and bonds. This makes more sense to me. When the economy seems to be slowing and consumers seem to be more limited on their spending, bonds and rates should be improving, which they are. Stocks though have been resilient for some time and were improving along with bonds regardless of the economic undercurrent. This was until about two weeks ago when I assume traders realized that a weaker economy could impact profits as well as an expectation that the AI business segment craze which will still grow, will likely grow at a slower pace. The main reasons for the remarkable resilience of the US consumer are starting to lose steam all at the same time, indicating that a recent pullback in household demand may prove more than a one-off. Real disposable income is cooling, saving rates are at a 16-month low and more Americans are turning to credit cards to support spending. That could help reassure the Federal Reserve that higher rates are restraining the economy.
Renters, a growing and sizeable portion of home dwellers, are staying put longer than ever according to a new report from Redfin as one in six renters (or 16.6%) stayed in their rental home, apartment, or condo for 10 or more years according to the most recent data available, which ends in 2022.
An interesting take from Bloomberg:
The first week of every month is always a big one for economic data. As we start June, there seems to be a glimmer of optimism that we’re seeing another cooling leg, when it comes to inflation. After a hot first quarter, the latest pricing data has come in, well, less hot.
According to CME data, it’s basically a coin flip at this point over whether we get a rate hike by the September meeting. Obviously, FOMC members want to see more real evidence of inflation continuing to slow and returning to trend. Signs of a slowdown in economic activity will also lower the bar to cuts.
So as for the calendar this week, today we get ISM manufacturing and total US vehicle sales.
Tomorrow it’s JOLTS and factory orders. Wednesday it’ll be ISM services and on Thursday initial jobless claims. And then the big one on Friday will be non-farm payrolls. Economists are looking for 190,000 new jobs, with the unemployment rate holding steady at 3.9%. Meanwhile, hourly earnings are expected to rise by 0.3% versus a 0.2% increase last month. Generally speaking, the labor market has been mellowing out. We still don’t have a lot of layoffs, as initial jobless claims keep bouncing along the bottom. But the pace of hiring has chilled out somewhat.
While Friday is still along way away, we’ll see if this mellowing trend continue tomorrow, when we get that JOLTS report. As of the prior month, total job openings continue to slide (though remain above pre-Covid levels) while the Quits Rate has fallen decisively below where it was in 2019.
Stay safe and make today great!
