Market Matters – September 16, 2022 Edition
September 16, 2022 / Alaska, Austin, Horseshoe Bay, Lakeway, Ranches, Ranches $1-1.5 Million, Texas, Texas Coastal Bend, Texas Hill Country, Texas Lakes and Rivers, Texas Ranches For Sale/By Michael Brown
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| The biggest takeaway this week is that inflation is hotter than the market was expecting, which is why the market has rallied to nearly 3.50% on the 10-year treasury. CPI and PPI both came in hot, and the market is pricing in at least a 75-bps rate hike for next week’s Fed meeting. The FOMC Statement and Powell Press Conference are next Wednesday, so it will be interesting to see how the Fed moves and how the market reacts. Since Powell’s Jackson Hole speech, the Fed in unison gave guidance that they are expecting to hold rates higher for longer to combat inflation. That rhetoric with inflation data coming hotter than expected is why we are seeing the 10-year treasury as high as it is, bringing along mortgage rates. |
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| Initial Jobless Claims fell by -5k to 213k for the week ended September 10th vs. the prior week’s revised print at 218k (orig. 222k). The four-week moving average dropped to 224k, the lowest since June. Continuing claims, which lag a week, rose +2k to 1.403mln from a downwardly revised 1.401mln (orig. 1.473mln). |
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| CPI for August came in hot, up 0.1% MoM for the headline, and up 8.3% YoY, beating market expectations of a fall of 0.1% MoM and +8.1% YoY. CPI ex food and energy was also hot, up 0.6% MoM and +6.3% YoY, beating expectations of +0.3% MoM and +6.1% YoY. The food index increased 0.8% MoM in August, energy index fell 5% MoM, and owner’s equivalent rent increased 0.7% MoM. Looking at the annual increase in a few categories, Outdoor equipment supplies +13.1%, Housekeeping supplies +11.7%, Food +11.4%, and Health Insurance +24.3%. After the hot CPI number, it looks like the Fed is raising 75 bps in their next meeting. |
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| Mortgage Applications for the week ending September 9th were down 1.2% WoW, compared to the prior week that was down 0.8%. The refi index declined 4.2% and is still at its lowest level since mid-October 2000 and is down 83.3% from a year ago. The purchase index was up 0.2%, although it is lower by 28.7% from a year ago. “The 30-year fixed mortgage rate hit the six percent mark for the first time since 2008,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting, adding “Higher mortgage rates have pushed refinance activity down more than 80 percent from last year and have contributed to more homebuyers staying on the sidelines.” |
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| PPI for August came in -0.1% MoM and for the year is up 8.7%, where the market was expecting -0.1% MoM and +8.8% YoY. PPI ex food and energy was up 0.4% MoM and is up for the year 7.3%, which is a slight beat from the market expectations of +0.3% MoM and +7.0% YoY. PPI ex food, energy and trade was up 0.2% MoM and for the year was up 5.6%, which is in-line with the market expectations of 0.2% MoM and 5.5% YoY. Prices for final-demand goods fell 1.2%, even after a 1.7% fall in the prior month. Most of this drop was due to a 6% fall in energy prices, mainly gasoline. Services prices, which make up about 65% of PPI, increased at a faster pace, up 0.4% vs 0.2% the prior month. The increase is associated with margins for final-demand trade services coming from fuel and lubricant retailing, securities brokerages, loan services and passenger transportation. This report matches up pretty well to the CPI data we saw yesterday. |
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| We feel neutral on the market as the 10-year is at 3.45%. We have support at 3.50% while we have resistance at 3.20, then at 3.09%. |
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