Mr. Freeze! June JOLTs Job Openings Cool -5.4% From May, Home Price Growth Cools As Fed Tightens

Is Fed Chair Jerome Powell “Mr. Freeze?”

We are seeing a slowing of the US economy. For example, the JOLTs (job openings) numbers are out for June and they are down -5.5% from May. And from April to May, JOLTs declined -3.2% MoM. That is a clear slowing trend.

And on the housing front, the CoreLogic HPI Forecast indicates that home prices will increase on a month-over-month basis by 0.6% from June 2022 to July 2022 and on a year-over-year basis by 4.3% from June 2022 to June 2023. But rose +18.3% YoY in June. Also a clear cooling trend.

And its “Escape From Blue States” (perhaps a new Kurt Russell movie), with home prices rising fastest in red states (primarily The South). And contiguous migration from California to Nevada and Arizona.

The Fed Funds Futures market is pricing in rate hikes until the March 2023 FOMC meetings. After all, Prince Imhotep (aka, Minneapolis Fed’s Neel Kashkari) is screaming for more rate hikes to fight inflation … caused by 1) loose monetary policies since late 2008 and 2) insane Federal government spending.

Let’s see if “Mr. Freeze” (aka, Jerome Powell) relents on Fed rate increases before the March 2023 FOMC meeting.

Grizzly Bear! US Existing Home Sales Crash -14.24% YoY In June As Fed Strangles Housing Market (Median Price 13.27% YoY As Inventory Still MIA)

Instead of The Boston Strangler, we now have the DC Strangler. Better known as The Federal Reserve and their war on inflation.

US existing home sales crashed -14.24% YoY and -5.40% MoM in June as The Fed tightens its icy grip on the housing market. Existing home sales were lower than expected at 5.12 million home sold SAAR.

Median price for existing home sales declined to 13.27% YoY as inventory available for sale remains MIA. And The Fed’s balance sheet is still out in force.

The US housing market in terms of sales has entered a bear market, but with The Fed’s balance sheet stimulus still hunting asset prices, it is a grizzly bear market in terms of affordability.

Bottle Of Wine? Strong US Dollar And Soaring Inflation Is A Brutal Cocktail For S&P 500 Firms (Will The Fed Pivot To QE Again?)

The US Dollar keeps strengthening as inflation skyrockets. Good news?

Bear in mind that a strong dollar is a two-edged sword. The US Dollar Index has risen 16% year-over-year, presenting a big hurdle for US firms with business overseas.

That strength of the greenback will rise until the Fed makes a dovish policy pivot.

And that pivot is forecast to occur at the Feb ’23 FOMC meeting.

But will The Fed pivot?

The Biden Cocktail. A fine wine turned to vinegar.

Alarm! US Mortgage Purchase Applications Tank 14% From Previous Week As Fed Turns Up Rate Heat (Refi Applications Index Down 80% YoY)

Alarm!

The Federal Reserve is reversing its excessive monetary stimulus policies left over from the financial crisis of 2008 (and Covid) and the mortgage industry and potential home buyers are paying the price.

Mortgage applications decreased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 8, 2022. This week’s results include an adjustment for the observance of Independence Day.

The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 14 percent compared with the previous week and was 18 percent lower than the same week one year ago.

The Refinance Index increased 2 percent from the previous week and was 80 percent lower than the same week one year ago.

The Shallows! Traders Fully Price 75-Basis-Point Fed Hike at July Meeting As Mortgage Rates Decline Slightly (Fed Fighting Inflation At All Costs!)

Here we go loop de loop! Traders are pricing in a 75 basis point rate increase at the July FOMC meeting despite collapsing Fed 5-year inflation breakeven rates.

Money markets are betting on a three quarter-percentage point hike by Federal Reserve officials later this month, wagering the US will need to ramp up the pace of monetary tightening to tame inflation.

The repricing comes ahead of a key inflation report due Wednesday. The headline figure for June is set to accelerate to 8.8% year over year, the highest since 1981.

Bankrate’s 30Y mortgage rate fell slightly ahead of today’s inflation report with the expectation of The Fed hiking their target rate by 75 basis points to 2.338% at the July 27th Fed Open Market Committee meeting.

Trader expectations from Fed Funds Futures data:

Last night I watched “The Shallows” on Peacock TV. I thought from the title that it was going to be a biography of The Federal Reserve, but it was a film about a surfer being attacked by a shark.

Ted Day! Spread Between 3M Libor And 3M Treasury Yield Rising Fast (Recession Alert!)

Its Ted Day!

TED refers to the difference between the three-month Treasury bill and the three-month LIBOR based in U.S. dollars, a measure of fear in the market.

The 3-month TED spread is rising awfully fast. A sign of impending recession.

US bank credit default swaps (CDS) are rising fast as inflation gets ugly.

The US Treasury 10Y-3M curve is bumping against the zero barrier.

I am still shaking my head at President Biden chastising gasoline stations for not lowering prices at the pump when refiners are near full capacity and the Biden Administration is doing nothing to increase the supply of US-source non-green energy.

But what the heck. It’s Ted Day!

Wipe Out! Bitcoin Falls Below $20,000 As Crypto Slaughter Continues (Good Luck With Soaring Gasoline And Food Prices On July 4th Weekend!)

Wipe out!

Crypto markets have slumped, adding to a decline that has wiped away some $2 trillion of market value and left market participants uneasy heading into the long Fourth of July weekend.

Bitcoin has fallen below $20,000 as the US Dollar strengthens.

At least Dogecoin is up today.

Enjoy your expensive 4th of July weekend! As long as you don’t eat much due to expensive food prices or drive anywhere due to high gasoline prices.

And government bonds on course for worst year since 1865 and President Abraham Lincoln (then President Andrew Johnson).

At least the Biden Administration is doing what The New World Order is making them do. Or The Liberal World Order.

Biden looks like he is saying “Kiss me you Statist fool!”

Fed Is ‘Just at the Beginning’ of Raising US Rates, Mester Says, MBA Mortgage Purchase Applications Drop -21% WoW As Rates Rise (Mester Channels The Carpenters)

Cleveland Fed’s Mester is channeling The Carpenter’s song “We’ve only just begun … to raise rates.”

Financial markets are anticipating what Mester is saying: rapidly rising interest rates. But as you can see from the following chart, gasoline prices (orange line) are driving rising US prices. So it is doubtful that monetary tightening will slow price increases. But Mester and company can only control monetary stimulus.

Mortgage rates have soared as The Fed attempts to crush inflation. And mortgage purchase applications fell -21% WoW in the most recent Mortgage Bankers Association survey.

The Refinance Index increased 2 percent from the previous week and was 80 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 0.1 percent from one week earlier. The unadjusted Purchase Index decreased 21 percent compared with the previous week and was 24 percent lower than the same week one year ago.

It almost seems like Mester is following the Taylor Rule (not really). But using CPI YoY, the Taylor Rule is saying that The Fed Funds Target Rate should be … 22.10%. It is only 1.75% after years of excessive stimulus following the banking crisis of 2008/2009. And Yellen who seemingly never met a rate hike that she liked.

If we use core PCE as our measure of inflation, the Taylor Rule is still high at 13.25%, a whopping 11.50 spread over the current target rate.

Will The Fed drive up rates and risk a recession ala Paul Volcker? Are we sitting on top of the world or about to get fried?

Bear in mind that gasoline prices are up 104% under the Biden Administration and mortgage rates are up 105%.

Weekend Update! Fed Quantitative Frightening, Growing Recession Likelihood, Mortgage Rates And Gasoline Prices Drop Slightly (Out Of Time?)

The US economy is out of time.

As a recession approaches, we are seeing the WIRP implied Fed o/n rate (green line) declining. And with The Fed chickening-out, we saw a surge in equities (NASDAQ composite index in blue).

Gasoline prices are falling too (orange line), but due to rising global economic slowdown. But notice that The Fed’s balance sheet (yellow line) is still growing despite repeated signals that Covid stimulus would be removed (I call this Quantitative Frightening).

As I mentioned above, The Fed has stopped trimming their balance sheet despite signals to the market of getting rid of the Covid stimulus. As Billy Preston sang, “Nothing From Nothing.”

The Atlanta Fed GDPNow Q2 forecast is for … 0% GDP growth despite the massive monetary stimulus and fiscal stimulus from Biden/Pelosi/Schumer.

And yes, the S&P 500 has officially entered a bear market under the leadership of Joe “The Bear” Biden.

So, Biden’s economic agenda (read, just spend more money and inflation declines?) is failing. Hence, The Fed is backing off a bit helping to drive up stock prices.

US markets are addicted to gov.

Sign Of The Times! US Gasoline Prices Decline To $4.94, Diesel Prices Rise To $5.80 As Recession Fears Mount (Reverse Repos At Fed Hit All-time High)

The talk of a gasoline tax “holiday” out of Washington DC is pure Kabuki theater. It is purely a sign of the times with Biden still trying to blame Putin for rising gasoline prices and inflation and ignoring his anti-fossil fuel policies that helped drive energy prices AND inflation through the roof.

Daily regular gasoline prices have dipped below $5.00 to $4.94 while diesel fuel, the lifeline of the shipping industry, rose slightly to $5.80. I guess the folks shipping food and other goods don’t get a holiday.

Note that the implied Fed target rate has fallen a bit as the probability of a recession increases.

And why are banks stashing so much money at The Fed in the form of reverse repos? Fear of recession, perhaps?

The Biden Administration is settling all kinds of records, and none are good.