Sentiment Sours As Macro Data Weakens

Today’s macro data did little to calm investors’ fears of a potential recession. 😱

S&P Global’s flash Composite Purchasing Managers’ Index (PMI), a measure of the services and manufacturing industries, fell to 51.8 in May, its lowest level since February 2021. Investors focused primarily on the weakening U.K. data, which may be a signal that a recession is on the horizon for the country. 🏭

In the U.S., April’s new home sales data fell 16.6% MoM and 26.9% YoY.

April’s annualized sales of 591,00 were well below analyst expectations of 750,000. The report also revised March’s data about 7% lower. 🏘️

The slowest sales pace since April 2020 is primarily driven by a significant pullback in demand, not new supply, as consumers face record-high home prices and the highest mortgage rates in over a decade. Builders are also starting to see cancellation rates tick up. ❌

Amid the weakness in recent housing data, investors also heard from Toll Brothers’ which beat earnings ($1.85 vs $1.60) and revenue expectations ($2.2 billion vs. $2.12 billion).

In its press release, the company noted,While demand is still solid, over the past month it has moderated from the unprecedented pace of the past two years as buyers adapt to higher mortgage rates and other macro-economic conditions. However, the many fundamental drivers of housing demand remain firmly in place.

Given the company operates in the luxury market, their view may not be the best read on the entire housing market. Nonetheless, things appear strong in their view. 💪

The economic/earnings news has been bad for a while, and market sentiment is not good. We heard *very bearish* perspectives from two of the world’s most prominent players today. 🐻

At Davos, George Soros said, “Indeed, the Russian invasion may turn out to be the beginning of World War III, and our civilization may not survive it.

Meanwhile, Bill Ackman took to Twitter with a *hot* take on inflation: “Inflation is out of control. Inflation expectations are getting out of control. Markets are imploding because investors are not confident that the Federal Reserve will stop inflation. If the Fed doesn’t do its job, the market will do the Fed’s job…” 

Can y’all believe it’s only Tuesday? 🙃

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The Housing Market Horror Continues

We’ve written extensively about the U.S. housing market’s troubles over the last eighteen months. But we saw a visual created by Michael McDonough and shared by Cullen Roche that really highlights just how rough things have gotten for homebuyers. 😬

Below is a chart that looks to track an “average” home purchase over the last 20+ years. It calculates the monthly mortgage payment using median existing home prices, assuming a 20% down payment and average 30-year mortgage rates.

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Market Looks Past CPI Report

If it feels like the market is largely finished obsessing about inflation data, it’s because it essentially is. Unless there’s a significant pick up in the core inflation metrics the Fed is watching closely, the market seems set on rates staying steady at next week’s Federal Reserve meeting.

And August’s consumer price index (CPI) data did little to move the needle. 😴

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13,000 Auto Workers Strike

After failing to reach a deal with the “Big Three Automakers” before Thursday’s 11:59 p.m. deadline, the United Auto Workers (UAW) union officially launched its historic strike. Although there have been major strikes before, there has never been a strike against all three automakers at once.

Combined, the automakers have 150,000 UAW-represented employees across their operations. For now, though, the strike is beginning at just one factory from each automaker, accounting for roughly 13,000 workers. However, union leaders say they could gradually expand the strike to additional plants (or all of them) if their demands are unmet.

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Jobs: The Good, The Bad, And The Ugly

Jobs numbers today showed that the U.S. labor market is showing signs of cooling faster than an iced latte in a polar vortex. Analysts expected 180k, but the number came in lower at 150k, missing the mark like a North Korean rocket test. 👨‍🚀

The Good 😃

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