MMRecap for May 19th

Posted by Joel pate in Uncategorized. Tagged:

Once again we are in “feast or famine” mode. Last week was “feast” week, although no reports were released on Monday. This is “famine” week, with a mere four releases on tap.
The lack of economic news didn’t hold back stocks last Monday, as each of the indices did pretty well. The Nasdaq once again led the way adding 79.99 points. It was followed by the S&P 500, which rose 18.17 points. The Dow added the most points, 112.13, but percentage-wise it made the smallest gain (0.68%). The 10-year yield went the other way, rising two basis points to close at 2.66%.
Tuesday was a shocker! Retail sales had been expected to be soft, but they gained a mere 0.1%. No one saw that coming. Excluding auto sales, the percentage dropped to 0.0. Export prices in April, excluding agriculture, fell 1.0%, while import prices, excluding oil, were down 0.4%.
The 10-year note, whose yield moves in the opposite direction of price, closed up 3 basis points to end at 2.61%. The Nasdaq was the winner in the stock indices race, adding 80 points. The S&P 500 rose 18.17 points, and the Dow closed at 112.13 points.
The other releases, which were of little importance to traders, included business inventories, which rose 0.4% in March. April import and export prices, which are usually ignored as they don’t make waves, showed the export price index (ex-agriculture) fell 0.1%, while imports (ex-oil) rose 0.4%. The best news of the day was that the 10-year note closed down 4 basis points at 2.62%.
Wednesday the producer price index and the PPI core were the lone reports, but they uncharacteristically shook things up, big time. These indices look for inflation at the wholesale level, and did they ever find it! The PPI rose 6% versus the 2% that was expected, and the PPI core, which eliminates food and energy prices, jumped to 5%. Those wanting a little inflation got way more than desired. Stocks sold quickly as inflation fears rose, sending the indices down a slippery slope.
That, however, was good news for bonds. Buying of Treasuries was aggressive, and the yield, which moves in the opposite direction of price, plummeted. The 10-year note closed at 2.41%, its lowest level since June 2008. The Dow closed down 101.47 points. The Nasdaq fell 29.54 points, and the S&P 500 lost 8.92 points. There were a lot of happy campers on Wall Street Wednesday afternoon.
Eight reports were released Thursday morning — some were great, some missed by a mile. The first report was initial unemployment claims for the week ended May 10. They fell by about 28,000; and continuing claims, workers applying for a second or more weeks of benefits, also fell by close to 15,000.
This was followed by the consumer price index, and it didn’t raise any eyebrows as it closely matched estimates. The CPI rose 0.3%, while the CPI core, which eliminates prices on food and energy, was up 0.02%.
Industrial production in April was a tad more upsetting, as it fell 0.6% when a 0.2% decline was expected. Capacity utilization, the percentage of a manufacturing facility running at 100% capacity, came in at 78.6% — down 0.4% from the previous month,
The Philly Fed Index, which monitors manufacturing conditions in several areas or the nation, posted a reading of 15.4 in May, up from April’s 16.6. It was well above estimates that ranged from 9 to 10. The final report was the NAHB Housing Market Index for May, a confidence report from the nation’s homebuilders, which came in at 45, below estimates of 48 and lower than the final reading in April.
When the markets closed, stocks had crawled out of negative territory. The Dow was up 44.50 points. The Nasdaq rose 21.30 points, and the S&P 500 added 7.01 points.
The 10-year note had quite a week for itself, closing at 2.52% — up 2 basis points from Thursday but down 10 basis points from the previous Friday.
The Mortgage Bankers Association reported mortgage applications increased 5.3% from the previous week. The refinance share of that activity decreased to 49% of the total applications, down from 50% the previous week. The average rate for conforming 30-year fixed mortgages decreased to 4.29%, the lowest since June 2013, with points remaining unchanged at 0.14 (including origination fee).
This week bears no resemblance to last week, as there are only a handful of reports due. Although not technically an economic report, the minutes of FOMC meetings have been known to impact trading. Those from April 30 will be released Wednesday afternoon. The details of the meeting have been made public, but investors still want to look for tidbits of information that may not have been made public
Thursday is loaded with reports, beginning with first-time jobless claims for the week ended May 17, but no estimates are available. Fortunately, existing home sales in April come with a forecast for an annual rate of 4.7 million units sold. That would be a healthy increase from 4.59 million units sold in March — a weather horror story. New home sales in April are expected to increase, as well. Analysts believe new home sales will soar from an annual rate of 384,000 to 430,000 units. Leading economic indicators for April will also be released, but that report is close to insignificant.
So, not much to move the 10-year rates this week.

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