Inside This Week’s Market News for May 22

CPINews last week was dominated by reports that the European Central Bank (ECB) stopped providing funding to some Greek Banks. Additionally, Spain will reportedly be in a recession throughout next year as the country seems to be drowning in debt with Bond yields not rising to higher levels. With this much risk in the market, the US Dollar and US Bonds represent a haven that traders seek, which means the financial drama in Europe directly benefits US Bonds.

Recently, inflation came in at 2.3% year-over-year as measured by the Consumer Price Index. It is essential for inflation to remain at stable levels if home loan rates are to remain near historic lows. While the year-over-year Consumer Price Index is at its lowest since February 2011, there appears to be negative correlation between inflation and what Treasuries are yielding.

Now continues to be the perfect time to purchase a new home as home loan rates are continuing to remain near historic lows.

Forecast

The Existing Home Sales as well as the New Home Sales reports will be released on Tuesday and Wednesday, respectively. This data will build upon last week’s positive Housing Starts report.

The Weekly Initial Jobless Claims will be coming this Thursday as will the Durable Goods Report for April. This will measure orders for big ticket items over an extended time. Completing this week’s reports is the Consumer Sentiment report which is being released this coming Friday.

The markets could see low trading volumes in the week leading up to the upcoming Memorial Holiday Weekend – this may cause some big swings in the market. Remember weak economic news normally causes money to flow out of stocks into bonds, therefore helping bonds and mortgage rates to improve, while strong economic news normally has the opposite result.

Graph: Data source: Haver Analytics courtesy of www.bloomberg.com

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