Consumers Pull Back Discretionary Spending

• 3 min read
Consumers Pull Back Discretionary Spending

MARKET MOVERS

  • Mortgage demand falls to the lowest level in 22 years. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.40% from 5.33%. Applications for a mortgage to purchase a home fell 7% for the week and were 21% lower than the same week one year ago. Refinance demand dropped 6% for the week and was down 75% year over year.

  • Consumers pull back discretionary spending. Bank of America on Wednesday downgraded Target to neutral from buy. The bank believes valuation pressure from discretionary category risks will likely offset strong long-term positioning. Target on Tuesday warned investors its profits will take a short-term hit as it takes aggressive steps to get rid of extra inventory by canceling orders and marking down unwanted items. Read more here.

  • Waymo partners with Uber on trucking. Waymo will connect its autonomous trucking operation to Uber Freight, the logistics business owned by the ride-hailing firm, a few months after the companies ended a bitter legal fight over self-driving technology. In the deal, carriers that use self-driving tech from Alphabet Inc.’s Waymo will be able to join the network from Uber Freight.

  • US consumer credit surges again. Total credit increased $38.1 billion from the prior month after a downwardly revised $47.3 billion gain in March. On an annualized basis, borrowing climbed 10.1%. With inflation largely outpacing wage growth, consumers have leaned on both savings and credit cards to pay for everyday essentials and discretionary purchases. Read more here.

  • Homebuyer sentiment hits a new low for 3rd month in a row. Only 17% of Americans surveyed in May said it was a good time to buy a home, breaking previous record lows of 19% seen in April and 24% in March. Although 76 percent said it was a good time to sell, rising mortgage rates are likely to make some would-be sellers reluctant to give up their existing mortgages. Read more here.

  • Uber Eats will now deliver across the country. Uber Eats enters DoorDash and Goldbelly's turf by launching nationwide shipping of gourmet foods from 4 US cities. It will allow customers across the U.S., excluding Alaska and Hawaii, to get specialty food delivered from select merchants in New York City, Miami, and Los Angeles. Source(23:51)

WHAT TO WATCH

  • Buffett-backed EV maker will supply batteries to Tesla. BYD shares rose on Wednesday after the Chinese electric vehicle maker said it was preparing to supply batteries to Tesla. BYD, which is backed by Warren Buffett’s Berkshire Hathaway, launched its lithium iron phosphate (LFP) “Blade Batteries” in March 2020 for use in its own cars as well as working on plans to sell them to other automakers.

  • TSMC expects 30% sales rise despite global economic ructions. It expects revenue to climb at least 30% this year, two months after forecasting a figure in the mid-to-high 20s. TSMC has a good track record of hitting its targets, so it wouldn’t have tweaked those numbers if it wasn’t sure it could get there. Underpinning this self-belief is continued demand for ever-faster chips not only for computers and games consoles, but servers and communications base stations. Read more here.

  • Spirit delays its special meeting so it can further discuss Frontier and JetBlue offers. The meeting has been moved to June 30 to allow Spirit’s board to continue discussions with Spirit stockholders, Frontier, and JetBlue Airways. This is the latest development to come over which company will acquire Spirit. The company also remains bound by the terms of the merger agreement with Frontier. Read more here.

  • The UK wants to regulate tech firms deemed ‘critical’ to finance. The UK wants its financial watchdogs to directly oversee tech firms that provide critical services to the industry as regulators increasingly fret about the growing dependence of banks on cloud computing. The UK Treasury is proposing designating certain non-finance firms as “critical” to the operation of the industry.
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