Mortgage rates have been volatile recently. After dropping below 6.9% in mid-May, the average 30-year fixed rate has hovered around 7% for the past few weeks. Although this is much lower than last fall's 23-year high of over 8%, homebuyers are still hoping for further reductions. Significant drops in rates are unlikely unless the Federal Reserve cuts interest rates in response to sustained lower inflation. Experts also emphasise the need for reduced consumer spending and a decline in the 10-year Treasury yield. However, a sharp drop in rates could reignite competition, potentially pricing some buyers out of the already limited housing market.
EQUITY
Stocks fell broadly on Wednesday, with the Dow Jones Industrial Average dropping over 1%. The energy and industrial sectors were hit, with airline stocks like American Airlines crashing after cutting profit guidance, and financial sectors down as economic slowdown fears from the GDP report that is coming. Offsetting some losses, Marathon Oil gained on news of its $17.1 billion all-stock acquisition by ConocoPhillips, and Dick's Sporting Goods rallied after raising its full-year forecast.
GOLD
Gold prices remained relatively flat on Thursday as investors braced for the release of the PCE price index to gauge Fed's next action. While gold is traditionally viewed as an inflation hedge, rising interest rates increase the opportunity cost of holding the asset. Goldman Sachs maintains a selective bullish stance on commodities, citing solid demand growth and expectations of structural upside in industrial metals and gold.
OIL
Oil prices down on Wednesday after three straight sessions of gains. Both benchmarks are poised for monthly losses, with Brent futures on track for a decline of over 5% and WTI futures set for a slide of more than 3%. The broader risk-off environment and larger-than-expected drawdown in U.S. crude inventories, as indicated by the API data, put pressure on oil prices. OPEC+ producers are considering extending their current supply cuts when they meet on June 2nd.
CURRENCY
The U.S. dollar index surged past 105, blamed on rising longer-dated U.S. Treasury yields, driven by disappointing auctions and foreign offloading. The stronger dollar aligned with firmer short-term U.S. rates, reflecting recalibrated expectations of the Fed's policy easing stance. The Fed's Beige Book struck a dovish tone, highlighting economic pessimism and shifting labour market dynamics. The yen slipped against the dollar but stayed close to recent highs ahead of Tokyo's inflation report while yuan slid as China's central bank allowed it to hit six-month lows.
