- Existing home sales fell 3.4% in May from the prior month
- Federal Reserve officials expect to increase the federal-funds rate to a range of 3.25% to 3.5% this year
- The Bloomberg Commodities Index has fallen 11% since June 9th
Top Three Market Headlines
Existing Home Sales Fall Again in May: Amid growing challenges facing the housing market, including rising mortgage rates and declining affordability, existing home sales continued their recent descent in May. The National Association of Realtors reported that sales of existing homes dropped 3.4% to a seasonally-adjusted annual rate (SAAR) of 5.41 million. This was the fourth straight monthly decline and the weakest reading since June of 2020. On the other hand, new home sales, which constitute a much smaller percentage of the housing market, rose for the first time in five months to a SAAR of 696,000—though this remained 17% below the recent cycle high of 839,000 new home sales in December of last year.
Fed Chairman Acknowledges Rate Hike Risk: In comments to congressional panels last week, Federal Reserve Chairman Jerome Powell acknowledged that the central bank's effort to slow inflation by increasing interest rates could tip the U.S. economy into a recession. This represented a less optimistic tone from the Fed Chairman, who previously had stated he believed the Fed could achieve a so-called "soft landing." According to the latest forecast, Fed officials expect to raise the federal-funds rate to a range of 3.25% to 3.5% this year from the current range of 1.5% to 1.75%. Underscoring the Fed's current focus, Mr. Powell cautioned against the risk of allowing "high inflation to get entrenched in our economy."
Recession Fears Dent Commodities Rally: Commodities have come under pressure in recent weeks, as rising recession fears have led investors to reassess the demand outlook for various commodities. After more than doubling since mid-2020, the broad Bloomberg Commodities Index has fallen 11% since June 9th. The steepest declines have occurred in industrial metals: front-month copper futures, for example, have fallen nearly 20% since early June. Energy commodities have also retreated, as futures prices for oil (West Texas Intermediate) and natural gas have fallen 13% and 34%, respectively, from intra-month highs.