Stocks and Mortgage Bonds are both higher to start the week. Bonds are rallying in response to some weaker Manufacturing data from the ISM.
The highlights of this week will be the jobs data, with the ADP and BLS Jobs Reports due for release on Wednesday and Friday respectively. The market is looking for 173,000 in ADP and 190,000 in BLS, with the unemployment rate expected to remain at 3.9%.
Something else to look for is the ECB (European Central Bank) that will likely start cutting rates on Thursday.
Manufacturing Data
The S&P Global Manufacturing Index rose from 50 to 51.3, which was stronger than the 50.9 expected. But this is the global index, and we have seen some stronger readings from the ECB.
Just looking at the US manufacturing picture - The ISM Reported their Manufacturing Index for May, showing the overall index fell from 49.2 to 48.7, which was weaker than estimates of 49.6 and in contraction.
New orders were weak, falling from 49.1 to 45.4 and are now in deeper contraction. Prices fell from 60.9 to 57, which was lower than the 60 estimate and is a good thing for inflation.
The one part of the report that was stronger was employment, which rose from 48.6 to 51.1, which was stronger than the 48.5 anticipated and is back into expansion territory, albeit slightly. Also, remember this is just for manufacturing employment, which has been weak.
NYT Pushes False Renting Narrative
The New York Times is back at it again, trying to push their rental calculator and explaining that it’s better to rent vs buy, and with the monthly savings and down payment/closing costs savings, you would be better off investing that at a historical 7% rate of return.
Make sure to watch today’s video for the full analysis! When breaking it down, we took the down payment and closing costs, which you have to subtract out what a renter would have to put down for a security deposit and did 7% return over 9 years. We then looked at the monthly payment differential each year and did a 7% return over 9 years. But the monthly payments start to get cheaper to buy over time as renewal rents continue to go up.
Bottom line – it ends up being roughly $190,000 better buying vs renting when factoring everything in and doing the math correctly. Again, make sure to watch today’s video for the full breakdown.
News this Week
Tuesday: JOLTS
Wednesday: Mortgage Apps, ADP Employment Report
Thursday: Initial Jobless Claims, Challenger Job Cut Report
Friday: BLS Jobs Report
Technical Analysis
Mortgage Bonds are moving higher and have broken convincingly away from the 50-day Moving Average. Bonds tested a dual ceiling of resistance at the 100.427 Fibonacci level and 100-day Moving Average, which is holding for now and rejecting further progress. If we are able to break above these levels there is a lot of room to the upside.
The 10-year has moved down beneath its 50-day Moving Average and is now testing Fibonacci support at 4.418%. The techincals are always important, but this week’s jobs data will be key for the near term direction of Bonds and rates. If we were to see a surprise 4% unemployment rate on Friday, it would likely be a party for Bonds.
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