Current position: Carefully Floating
Stocks and Mortgage Bonds are both slightly lower to start the day.
We heard from St. Louis Fed President James Bullard yesterday, and he says that he wants two more rate hikes this year. Although Fed Chair Powell expressed that the Fed may not have to raise hikes as high due to the credit stress in the Banking system. We will get the Fed minutes from the last Fed meeting tomorrow at 2:00 pm ET.
Jamie Dimon said he wants to see 6 or 7 more hikes, but of course remember, he is likely talking his own book. JP Morgan has been able to grow even larger and acquire banks as a result of the banking crisis, and additional hikes would only make more banks fail and help them potentially grow larger.
In the video we shared a chart on bank deposits and money market accounts - Clearly, consumers are fleeing from banks because there is a better place to park their money. This is causing a lot of the selling we have seen in Bonds, as banks have had to sell assets to come up with depositor funds. So far we have not seen this slow down, but we hope to see this get exhausted soon.
New Home Sales
New Home Sales, which measures signed contracts on new homes, rose 4% in April to a 683,000 - unit annualized pace. However, March was revised lower and when factoring in the revision, sales were unchanged from the originally reported number last month. Sales still are at the best number in 13 months and are up almost 12% year over year. Builders are selling more and getting more traffic due to the lack of existing homes for sale.
There were 433,000 new homes for sale at the end of April, and at the current pace of sales, there is a 7.6 months' supply. However, only 70,000 or 16% are completed. When looking at the pace of sales vs homes that are completed (available supply), there is only a 1.2 months' supply .
The median home price fell 7.7% last month to $420,800, but this can be skewed due to the mix of sales. Year over year, the median home pri
ce is down 8%. Actual appreciation reports are showing that home prices have started to rise once again since Jan/Feb depending on the report.
And while builders are still offering incentives, they are offering them in fewer instances, showing that demand and pricing pressure is there.
Fed's Survey of Household Economics and Decision making:
-Survey was just released but for 2022, these findings have most likely gotten worse so far this year.
-2/3 of those surveyed said they are renting because they don't have enough for a down payment, which coincides with the NAR survey showing that almost 50% of first time home buyers think they need 20% down.
-35% of Americans said they were worse off than a year earlier, up from 20% in 2021 and the highest share in nine years.
-Only 63 % of respondents said they had cash available to cover a $400 emergency expense, and this was down from 68% in 2021.
Mortgage Bonds are clinging to support at the 99.7 floor. If this level is broken, there is a long way down until reaching the next level of support. If you look at the candles from the last week, almost all of them are "hammers", which means that the Bond market is trying to reverse. Bonds are deeply oversold as well, which means that a positive move to the upside would cause favorable momentum indicator.
The 10 - year is trading in a wide range between support at 3.644% and overhead resistance at 3.786%. With support holding for now on MBS, begin the day carefully floating.