Commentary: The few investors still at their desks on this holiday shortened trading day showed little reaction to this morning’s April Income and Spending report.
Even though income has been rising for seven consecutive months -- inflation adjusted spending edged up a mere 0.1% as high gasoline prices continued to squeeze household finances.
The consumer drives roughly 70% of all domestic economic activity and if they are keeping their hands in their pockets – the prospect for notable improvement in second-half economic growth remain dim.
Inflation as measured by the Personal Consumption Expenditure index, a component of this morning’s report, showed an outsized year-over-year gain last month.
While making note of the gain in inflation pressure – traders chose to give the collective April Income and Spending story nothing more than a passing glance.
Looking ahead to the coming week – the economic calendar will offer investors their first glimpse of overall activity in May with Wednesday’s ISM Manufacturing Index and Thursday’s ISM Service Sector Index serving as the warm-up act for Friday’s much anticipated May Nonfarm Payroll report. Most economists believe the upcoming data will be supportive of steady to perhaps fractionally lower mortgage interest rates. The technical perspective has moved to a level where it is now out of sync with economists’ fundamental views. My battery of technical indicators is flashing an increasing number of signals suggesting a near-term profit-taking sell-off in the mortgage market may be imminent. Be ready to move on very short notice should the technical perspective prove to be the more accurate.
THE MARKET IS ALWAYS RIGHT! … YOU AND I ARE SOME OF THE TIME
