Economic Update - Rate Hike & Housing
Stocks are dropping today after rallying on Wednesday despite the biggest rate hike since 1994. The Fed rose interest rates by 75 basis points yesterday, an increase Fed Chair Jerome Powell said he did not expect to be common. Powell did acknowledge that the Fed could hike by 75 basis points again in July however. The indices are down at least 2.3% today, with the DJIA falling below 30,000 and reaching the lowest level since January 2021.
Looking at economic data today, initial jobless claims fell less than expected to 229,000, a smaller decrease than expected. Claims had been expected to fall from 232,000 to 220,000. Continuing claims were slightly lower at 1.31 million.
U.S. housing starts plunged 14.4% in May to an annual rate of 1.55 million, the lowest level since April 2021. Starts had been expected to fall to 1.68 million. Building permits fell 7.0% to a rate of 1.70 million, also a bigger drop than expected. Both readings support the thesis that the housing market is cooling amidst soaring mortgage rates.
U.S. Treasury yields are lower, with the 2-year Treasury yield down 3.7 basis points to 3.24%, the 5-year Treasury yield down 1.4 basis points to 3.46%, and the 10-year Treasury yield down 1.6 basis points to 3.38%. With the exception of the overnight, advance rates are lower today.
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