Rate outlook Memorial Weekend 2019

A Mixed Bag

Rates remain low and momentum is strong heading into the Memorial Day weekend.

The biggest economic report of last week disappointed investors as April Retail Sales fell by 0.2%, despite a 1.2%surge in gas sales. The index was pulled down by a 1.9% drop in building materials sales, and a 1.1% decrease in auto sales. Excluding all those big-ticket items, retail sales were nearly flat for the month.

Manufacturing also slumped in April, with the Industrial Production report printing a drop of 0.5% in output. On a positive note, small business confidence beat expectations in April, posting a 103.5, with the outlook for sales, the economy, and future capital investments all positive.

But on the positive side, the University of Michigan’s May Consumer Confidence report matched the highest level since the end of the Great Recession, driven by a big improvement in the future outlook. This could indicate an increase in personal consumption in future months.

Don’t look now, but lower mortgage rates have driven up Homebuilder Confidence to its highest level in six months. Homebuilders reported higher foot traffic in their sales offices in April. Both building permits and housing starts rose in April, with starts surging by 5.7%.

Treasury yields were driven almost entirely by trade news and the breakdown in Brexit talks. After a roller-coaster trading week, the U.S. 10-year yield ended up falling 7 basis points to 2.39%.

This should be a quiet week for economic news. We’ll get a peek at April Existing Home Sales on Tuesday, while April New Home Sales will be reported on Thursday. Most important could be Wednesday’s release of the minutes from May’s Fed meeting..

Have a great week! Thanks, Dan

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