US stocks dropped into a bear market. By the end of trading, the benchmark S&P 500 was more than 20 percent lower than its recent high in January. Investors were rattled by an unexpectedly high US inflation report that was released on Friday. Analysts then upgraded their forecasts of how much the Fed will raise interest rates to deal with inflation. This is the second time Wall Street has entered a bear market in the past month. Source(0:51)
Wholesale prices rose 10.8% in May. The producer price index, a measure of the prices paid to producers of goods and services, rose 0.8% for the month and 10.8% over the past year. The data is significant in that prices at the wholesale level feed through to consumer prices, which are running at their highest levels since December 1981. For wholesale prices, energy made up much of the May gains. Read more here.
Private investors buy up retail real estate as bigger players remain cautious. Private investors are snapping up shopping centers and other bricks-and-mortar real estate. These buyers were responsible for nearly three-quarters of retail-asset acquisitions in 2021, a 30% increase from the 10-year historical average. If current trends persist, brokers expect REITs and major institutions to follow these smaller investors to the market.
Coinbase will cut 18% of full-time jobs. CEO Brian Armstrong pointed to a possible recession, a need to manage costs, and growing “too quickly” during a bull market. He also said that we appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter and could last for an extended period.
Bond slide deepens. Rocked by data showing a broadening increase in consumer prices, bonds slid sharply on Friday and then again on Monday, pushing yields on U.S. Treasurys to their highest levels in more than a decade at 3.371%. Yields on Treasurys largely reflect investors’ expectations for short-term rates over the life of a bond, and they in turn set a floor on borrowing costs across the economy. Read more here.
Housing inventory shortages persist. Coupled with pandemic-related supply and labor shortages and a forecast that approximately 1.2 million single-family housing starts (new residential construction) will take place in 2023, according to data from Statista, inventory will likely remain an issue for years to come, therefore continuing to drive up home prices. Read more here.
Homebuyer budgets stayed flat even as prices shot up. Homebuyer budgets increased by 0.3 percent annually while prices tallied record gains, according to a new analysis by Redfin released Monday. Redfin says the declines are a leading indicator that home-price growth has passed its peak and will begin to slow. The company also says the decline is a sign high mortgage rates are having a big impact on how much money buyers can spend.
WHAT TO WATCH
Fed is likely to consider a 0.75-percentage-point rate rise this week. The inflation data is not going their way. Last week’s inflation report from the Labor Department showed a bigger jump in prices in May than officials had anticipated. The S&P 500 also closed in a bear market territory (down 20%) was the big news Monday. Read more here.
Elon Musk will speak with Twitter’s staff for the first time this week. It will be an all-hands meeting on Thursday. Parag Agrawal announced the meeting in an email to staffers. Twitter employees, many of whom have been less than happy with Musk’s takeover, will be able to submit questions for Musk ahead of the meeting.
Terrible GPU sales for NVDA/AMD moving forward. Knowing that the merge is coming and ETH is at $1,300 with rising energy prices (electricity), hardware probably is not being purchased right now. If anything, it would be smarter for miners to sell all the equipment they can. Mining is now suddenly a disaster with the Ethereum price collapsing and Celsius causing another big drawdown. Read more here.
Spirit Airlines will decide on bids before the end of June. Spirit Airlines said its board will decide on competing offers from JetBlue Airways and Frontier Airlines before a shareholder meeting at the end of the month. Spirit postponed a meeting where shareholders would vote on an existing Frontier deal from June 10 until June 30 to review the bids.
The great housing market deceleration is coming, according to analysts. The housing market is officially cooling after two consecutive months of reduced activity. February through April 2022 has seen consistent month-over-month declines in existing home sales. According to NAR, April sales were down 5.9% from last year and down 2.4% from the previous month. Read more here.