So today is a big online shopping day. Getting any good deals from the retailers falling all over themselves for your business? Pro tip: Alt + Tab will get you back to the spreadsheet real fast should the boss walk by, not that I would know anything about that. All I care about giving you today is the very best market and mortgage news.
OK, I may have lied. I’ll probably end up taking advantage of a least one of the sales today, but I digress. For now, let’s get into the headlines.
Consumer Price Index (CPI)
Every day is a new surprise when it comes to looking at the movement of markets and economic data. Most of the market expects a cut in short-term interest rates at the Federal Reserve’s next meeting of its Federal Open Market Committee taking place the last 2 days of July. While that cut is still expected to happen, this consumer inflation report doesn’t add anything for supporters.
The headline rate is a bit deceiving with energy prices falling and food prices running about even compared to May. Gas prices were down 3.6% and overall inflation rose just 0.1%, rising 1.6% year-over-year. However, when food and energy were taken out of the equation, the core rate was up 0.3% and is just about where the Fed would like to see it, up 2.1% on the year.
Apparel in particular was up 0.4% and this is one metric the Fed has been keeping a close eye on. In addition, the cost was up 0.4% and has risen 3.9% on the year. Meanwhile, there was also a 0.3% rise for owners’ equivalent rent – a measurement of how much it would cost for a homeowner to rent out a space comparable to what they own. The cost of housing is up 0.3% overall, as is medical care. These two key components are up 3% and 2% year-over-year, respectively.
Initial jobless claims fell 13,000 last week to come in at 209,000 claims. The 4-week moving average fell 3,250 to settle at 219,250.
Meanwhile, continuing claims didn’t fare as well, up 27,000 to come in at 1.723 million. The 4-week moving average was about 1.695 million, up 5,750 from the week prior.
Producer Price Index (PPI)
Prices on the producer’s side of things, which eventually get passed to the consumer, were up 0.1%. They’ve gone up 1.7% on the year overall. As it was on the consumer side, when food and energy were taken out, producer prices saw expectations rising 0.3% and 2.3% on the year. However, when further removing trade services, prices were flat, still rising 2.1% on the year.
Energy prices were down 3.1% on the month, while finished goods were down 0.4%. There was a 0.8% drop in computers while government purchases were down 0.4%. Cars and light trucks were flat.
Food prices were up 0.6% and service prices were up 0.4%, including a 1.3% uptick in the wholesale trade services, gaining back the declines that were seen in the last 2 months. Personal consumption inflation taking out food and energy was up 0.5%. This is a strong reading and one the Fed is no doubt paying attention to.
Twice a year, Federal Reserve Chairman Jerome H. Powell has to go before Congress to give testimony on the state of the economy. While he said the U.S. economy is strong, he pointed to worries about global growth and the ongoing impact of tariffs as causes for concern. The market was all but certain there would be a short-term interest rate cut in July.
Over the next two days, both the consumer and producer inflation reports came out showing that when food and energy were taken out, inflation is actually doing a little bit better. This would lessen the case for dropping short-term interest rates. However, most analysts still expect some sort of move at the end of July.
Why does any of this matter? Although not directly correlated with mortgage rates, if short-term rates fall, mortgage rates do tend to do the same. The meeting at the end of July will be very interesting.
However, you don’t have to wait until the end of July to get a great deal. Lock your rate today on Rocket Mortgage®. It’s a great day if you’re in the market to purchase or refinance.
Let’s take a look at what the average rates were across the industry last week according to Freddie Mac.
The average rate on a 30-year fixed mortgage with 0.5 points paid in fees was flat on the week at 3.75%. This is down from 4.53% at the same time a year ago.
Meanwhile, when it comes to shorter terms, the average rate on a 15-year fixed mortgage was up four basis points to 3.22%. This was down from 4.02% last year at this time.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable rate mortgage (ARM) with 0.4 points paid was up a single basis point to 3.46%. This has fallen from 3.86% at this time a year ago.
In anticipation of a short-term rate cut, stocks rose to all-time highs Friday, despite there being light trading volume. The S&P 500 topped 3,000 for the first time ever.
The Dow Jones Industrial Average was up 1.52% on the week after rising 243.95 points Friday to close at 27,332.03. Meanwhile, the S&P 500 was up 13.86 points on the day to close at 3,013.77, up 0.78% on the week. Finally, the Nasdaq finished at 8,244.14, up 48.1 points on the day and 1.01% on the week.
The Week Ahead
Tuesday, July 16
Retail Sales (8:30 a.m. ET) – Retail sales measure total receipts from stores selling merchandise and related services to final consumers. Sales are measured by retail and food service stores. Data is collected from the Monthly Retail Trade Survey conducted by the U.S. Census Bureau.
Industrial Production (9:15 a.m. ET) – The Federal Reserve’s monthly index of industrial production – and the related capacity indexes and capacity utilization rates – covers manufacturing, mining, and electric and gas utilities.
Housing Market Index (10:00 a.m. ET) – The National Association of Home Builders (NAHB®) produces a housing market index based on a survey in which respondents from the organization are asked to rate the general economy and housing market conditions. The index is a weighted average of separate diffusion indexes, including present sales of new homes, sales of new homes expected in the next 6 months and traffic of prospective buyers in new homes.
Wednesday, July 17
MBA Mortgage Applications (7:00 a.m. ET) – The mortgage applications index measures applications to mortgage lenders. This is a leading indicator for single-family home sales and housing construction.
Housing Starts (8:30 a.m. ET) – A housing start is registered when the construction of a new residential building begins. The start of construction is defined as the beginning of excavation of the foundation for the building.
Thursday, July 18
Jobless Claims (8:30 a.m. ET) – New unemployment claims are compiled weekly to show the number of individuals filing for unemployment insurance for the first time. An increasing trend suggests a deteriorating labor market. The 4-week moving average of new claims smooths out weekly volatility.
Friday, July 19
Consumer Sentiment (10:00 a.m. ET) – The University of Michigan’s Consumer Survey Center questions 500 households each month on their financial conditions and attitudes about the economy. Consumer sentiment is directly related to the strength of consumer spending.
Next week, we get a lot of housing data and some insight on retail sales and industrial production numbers. We’ll have it all covered in next week’s Market Update!
We’re acutely aware that while this information is important, it can be quite dry and not necessarily hold the attention, particularly on such a big day for e-commerce. If you subscribe to the Zing Blog below, we’ve got plenty of stimulating content to share with you. Here are some tips for navigating today’s craziness and getting the best deal possible. Have a great week!
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