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The CML Close - An everything rally, rates hiked, retail sales down, mortgage applications down - 06-15-2022

Date Published:

Risk assets saw an everything rally off of the Fed's decision to raise the federal funds rate by 75 basis points. Non-fuel import prices dropped for the first time since November 2020, and retail sales came in far below estimates.

SPX 3,789.99 +54.51 (+1.46%)
NASD 11,099.15 +270.81 (+2.50%)
DJIA 30,668.53 +303.70 (+1.00%)
R2K 1,731.14 +23.31 (+1.36%)
VIX 29.62 -3.07 (-9.39%)
Oil 115.73 -3.20 (-2.69%)

• The Fed raised its benchmark interest rate by 75 basis points, ahead of the 50 basis point prior messaging.

• Mortgage applications were 52.7% lower than a year earlier.

• Retail sales in the month over month measure came in lower at -0.3% versus the +0.2% estimate.

• The housing market is cooling.

Headlines of the Day
Stocks Stage an ‘Everything Rally’ After Fed Steps Up Its Fight Against Inflation
The stock market jumped Wednesday after the Federal Reserve made its biggest inflation-fighting move in nearly 30 years—raising interest rates by three-quarters of a percentage point. The Fed also laid out a fairly aggressive rate-hiking path going forward. The median Fed member now sees the benchmark lending rate hitting 3.75% by the end of 2023. It seems—for the moment—the markets had already reflected even higher interest rates.

Mortgage demand is now roughly half of what it was a year ago, as interest rates move even higher
Total mortgage application volume was 52.7% lower last week than the same week one year ago, according to the Mortgage Bankers Association's seasonally adjusted index.

Housing market is cooling as an estimated 25% of home listings cut their asking prices
Altos Research says that the sector is finally returning to ‘normal’ conditions

The European Central Bank said it will act to reduce impact of interest rates rising more steeply in some of its member countries than others.
Policy makers held an emergency meeting on Wednesday after Italian government bond yields surged above 4% and the difference between German yields and others’ widened.

Coinbase lays off 18% of workforce as executives prepare for recession and 'crypto winter'
CEO Brian Armstrong pointed to a possible recession, a need to manage costs and growing "too quickly" during a bull market.

Economic Data Results for 6-15-2022
United States Fed Funds Rate
The Federal Reserve increased the funds rate by 75bps to 1.5%-1.75% during its June 2022 meeting, instead of 50bps initially expected, after the inflation rate unexpectedly accelerated last month to 41-year highs. It is the biggest rate increase since 1994.

U.S. Retail Sales
Retail sales in the month over month measure came in lower at -0.3% vs +0.2% estimate , and downwardy revised +0.7% increase in April from +0.9%. Auto sales recorded the biggest decline of -4%. Electronics & appliance stores -1.3%. Miscellaneous store retailers -1.1%.

United States NY Empire State Manufacturing Index
The New York Empire State Manufacturing Index rose to -1.2 in June of 2022 from -11.6 in May, missing market forecasts of 3.

United States Non-fuel Import Prices
Prices for non-fuel imports declined 0.3 percent, marking the first decline since November 2020.

United States MBA Mortgage Applications
Mortgage applications in the US increased 6.6% in the week ended June 10th, the first increase in five weeks, but were 52.7% lower than a year earlier.

Economic Data Due Tomorrow on 6-16-2022
Housing Starts

Philadelphia Fed Manufacturing Index

Initial Jobless Claims

Building Permits


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