November 12, 2022

Weekly Market Commentary November 7th to November 11th 2022

Markets rejoiced this week following the release of the Consumer Price Index on Thursday morning. CPI month-over-month was 0.4% while year-over-year was 7.7%, both 20bps below expectations. When stripping out food and energy, Core CPI was 6.3% versus a 6.5% expectation. The month saw many notable price declines, such as apparel, household furnishings, health insurance, used cars, and airfares. Food costs rose by 0.6% on the month, but the gain marked the smallest increase on the year.

Jobless Claims rose by 7,000 to 225,000, surpassing the 220,000 expectation and reaching a four-week high. Over the past 5 months, the average number of jobless claims each week is 228,000.

US consumer borrowing rose in September by less than expected, reflecting a smaller advance in outstanding credit-card debt. Consumer credit rose $24.9 billion, or 6.4% annualized, to a total of $4.7 trillion. Revolving credit, which includes credit cards, rose $8.3 billion to $1.2 trillion, the smallest increase in four months. Nonrevolving credit, such as student and auto loans, rose $16.7 billion to $3.5 trillion, the biggest increase in three months. Consumers are beginning to pinch their pennies, as Visa Inc. and Mastercard Inc. both noted that spending growth had slowed.

The MBA Mortgage Applications Index fell 0.1% on the week, marking the seventh consecutive weekly decline as the index reaches its lowest reading since 1997. Although purchases are up 1.3% after falling 0.8% last week, Refi’s fell 3.5% as the average 30-year fixed rate mortgage sits at 7.14%. The climb in fixed mortgage rates is encouraging homebuyers to seek out adjustable-rate mortgages, with ARM activity increasing to 12% of all applications, up from 10% in the summer. The 5-year ARM currently sits at 5.87%.

Aided by a favorable CPI print, the markets had a strong end to the week with all major indices closing in the green. The S&P 500 closed 5.9% higher at 3,993, the Nasdaq 8.3% higher at 11,340, and the Dow Jones Industrial Average 4.2% at 33,748. Treasury yields fell hard as the market rallied, with the 10-Year U.S. Treasury closing at 3.85% and the 2-Year U.S. Treasury closing at 4.35%, the lowest close in 5 weeks for both.

Next week investors will be focusing on the Producer Price Index, Housing data, and Retail Sales.

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