The June jobs report ends the chance of a July rate cut – The Daily Tearsheet


Vital Statistics:

Stocks are lower as investors return from the long weekend. Bonds and MBS are down small.

The week ahead will be relatively data-light, although we will get the FOMC minutes from the June meeting. It will be interesting to see how many voters were getting cold feet on the wait and see approach with tariffs. We will have a 10 year auction on Wednesday and a 30 year auction on Thursday.

The June 9 deadline for trade deals will arrive this week, although the Administration has indicated that might get pushed back as negotiations are in progress with a bunch of our partners.

June’s jobs report put the kibosh on any rate cut at the next FOMC meeting late this month. The probability of a cut fell from around 20% to below 5%.

The services economy expanded in June after contracting in May. Business activity rebounded, and New orders moved back into expansion territory.

“June’s PMI® level is a welcome return to expansion, although slow growth and economic uncertainty were frequently referenced by respondents. This month’s reading is equal to the average reading of 50.8 percent over the prior three months, indicating both stability and slight expansion in that time period. Both the Business Activity and New Orders indexes returned to expansion territory, although the Backlog of Orders Index contracted at a faster rate compared to May. Price increases impacting costs of operations were mentioned more frequently this month. Middle East tensions were a new subject of comments in June, but there was no indication of related supply chain disruptions. The most common topic among survey panelists continued to be concerns about impacts related to tariffs.” Note that the prices paid index fell.

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The first time homebuyer is struggling to get on the first rung of the housing ladder, which is helping landlords. At today’s prices, buyers would need to earn $127,000 to afford the monthly mortgage repayments on a median-priced home, up from $79,000 in 2021, according to Harvard’s Joint Center for Housing Studies. Only 6 million of the country’s 46 million renters clear this hurdle. 

The big builders were offering mortgage rate buydowns to entice the first time homebuyer, however these aren’t working as well as they used to. Builder Lennar has said it needs to offer 13% incentives to move the merchandise.

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