Morning Report: Awaiting the Fed

Vital Statistics: Stocks are flattish as we await the Fed decision. Bonds and MBS are down. The Fed decision is due at 2:00 pm today, and Jerome Powell will hold a press conference afterward. The Fed Funds futures overwhelmingly see the Fed maintaining the current Fed Funds range of 5% – 5.25%. The consensus seems to be the Fed will do a hawkish pause, meaning they will skip hiking this meeting and leave the door open for another hike in July. We probably aren’t going to get an all-clear signal out of them. The dot plot will be the focus for the markets. The March dot plot showed the majority of members saw the end-of-2023 Fed Funds rate in the current range. There were a few members who thought rates could go higher. I wouldn’t be surprised to see the economic projections revised as well, especially GDP which was forecast to rise 0.5% this year. With Q1 coming in at 1.1% and the Atlanta Fed GDP Now Index seeing a 2.2% increase in Q2, the economy would have to fall off a cliff to make that 0.5% forecast. The unemployment forecast of 4.5% is probably too high as well. We got another benign inflation report with the Producer Price Index declining 0.3% in May. On a YOY basis, the index rose 1.1%, which is below the Fed’s target rate for inflation. If you strip out food, energy and trade services, the index was flat in May and up 2.8% on an annual basis. About 60% of the decline in the headline number was due to lower gasoline prices. Mortgage applications rose 7.2% last week as purchases rose 17% and refis increased 6%. “Mortgage rates declined for the second straight week, with the 30-year fixed rate decreasing to 6.77 percent. Mortgage applications were up over the week, but remained well below levels from a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain homebuying activity in many markets. The average loan size on a purchase loan decreased for the third straight week, as we continue to see more first-time homebuyer activity in the purchase market. Refinance applications accounted for less than a third of all applications and remained more than 40 percent behind last year’s pace. Elevated rates have reduced the benefit of a rate/term refinance for many borrowers and continue to discourage cash-out refinances as borrowers are unwilling to give up their lower rates.” Comerica is exiting the mortgage banker finance business. This should primarily affect the warehouse lending business. [Image] Here are Some More Investing Tips and Resources. Enjoy! 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The Fed Funds futures overwhelmingly see the Fed maintaining the current Fed Funds range of 5% – 5.25%. The consensus seems to be the Fed will do a hawkish pause, meaning they will skip hiking this meeting and leave the door open for another hike in July. We probably aren’t going to get an all-clear signal out of them. The dot plot will be the focus for the markets. The March dot plot showed the majority of members saw the end-of-2023 Fed Funds rate in the current range. There were a few members who thought rates could go higher. I wouldn’t be surprised to see the economic projections revised as well, especially GDP which was forecast to rise 0.5% this year. With Q1 coming in at 1.1% and the Atlanta Fed GDP Now Index seeing a 2.2% increase in Q2, the economy would have to fall off a cliff to make that 0.5% forecast. The unemployment forecast of 4.5% is probably too high as well. We got another benign inflation report with the Producer Price Index declining 0.3% in May. On a YOY basis, the index rose 1.1%, which is below the Fed’s target rate for inflation. If you strip out food, energy and trade services, the index was flat in May and up 2.8% on an annual basis. About 60% of the decline in the headline number was due to lower gasoline prices. Mortgage applications rose 7.2% last week as purchases rose 17% and refis increased 6%. “Mortgage rates declined for the second straight week, with the 30-year fixed rate decreasing to 6.77 percent. Mortgage applications were up over the week, but remained well below levels from a year ago,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Rates that are still more than a percentage point higher than a year ago, and low for-sale inventory continue to constrain homebuying activity in many markets. The average loan size on a purchase loan decreased for the third straight week, as we continue to see more first-time homebuyer activity in the purchase market. Refinance applications accounted for less than a third of all applications and remained more than 40 percent behind last year’s pace. Elevated rates have reduced the benefit of a rate/term refinance for many borrowers and continue to discourage cash-out refinances as borrowers are unwilling to give up their lower rates.” Comerica is exiting the mortgage banker finance business. This should primarily affect the warehouse lending business. [Continue Reading...](?site= [Morning Report: Awaiting the Fed]( And, in case you missed it: - [Risks of Pharmaceutical Stock Investments](?site= - [Episode #485: Dan Niles on Big Tech Stocks and the AI Revolution](?site= - [Assessing the Commodities Trading Landscape](?site= - [Cudos ICO: An Innovative Cloud Computing Network is coming](?site= - [AUD to USD Conversion Approaches 0.6800](?site= - FREE OR LOW COST INVESTING RESOURCES - [i]( [i]( [i]( [i]( Sponsored [Are You Prepared for the Death of the Dollar?]( The dollar is not as stable as we once thought. The national debt is skyrocketing, inflation is rising, and the government seems unable to control it. All of this points to a possible collapse of the dollar, and the consequences will be catastrophic. [Here's How To Prepare]( By clicking the link you are subscribing to The Wealth Creation Investing Newsletter and may receive up to 2 additional free bonus subscriptions. Unsubscribing is easy. 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