The Bond market is closing early today at 2:00 pm ET and will be closed all day on Monday in observance of the 4th of July Holiday.
Stocks are mixed and Mortgage Bonds are sharply higher to start the day. The 10-year has broken beneath 3% and is now trading at 2.82%.
After yesterday’s PCE report, where consumer spending was half of expectations, and the previous report was revised lower by 0.4%, the Atlanta Fed has now made some revisions to their Q2 GDP estimates. Initially, they were expecting 0% growth, but they have now revised that to -1%. One of the textbook definitions of a recession is two consecutive quarters of negative GDP…and although the NBER (National Bureau of Economic Research), who is the official who calls when we are in a recession, has expanded its definition of a recession, it would be hard to ignore two consecutive quarters of negative GDP. Of course, this is just the Atlanta Fed estimate and we have to see where Q2 GDP really comes out at, but this is certainly showing signs of the economy slowing.
GM came out with their earnings report and said that they can’t count sales of 95,000 vehicles, even though they aren’t sold, because they are waiting on semiconductor chips. This shows that the supply chains are causing shortages still – If we can get some of this cleared up it can help with some of the inflationary pressures we are seeing.
Edmonds shows that a record 12.7% of consumers who financed a vehicle purchase had a monthly payment of $1,000 or more. This is up from 7% last year. It shows the impact of inflation but also can cause a big drag in the future. Initially, those sales generated economic activity, but now the families that bought those cars now have big monthly payments and are financing them for a long, which will reduce their discretionary income and can cause a slowdown in the future.
Mortgage Bonds are sharply higher, breaking above the 50-day Moving Average and 100.603 resistance level. They are now testing the 50-day Moving Average, which is an important ceiling. If Bonds can get above this level, there is a ton of room to the upside before reaching the next ceiling at 102.214. The 10-year has broken beneath support at the 25-day Moving Average and 3% level and is now trading at 2.82%. Yields have broken all nearby notable support and have room to improve until reaching 2.60%.
