Homebuilders were increasingly upbeat in March and April as they awaited lighter mortgage rates that would support housing affordability. The lack of progress on borrowing costs, however, led to a sharp plunge in homebuilder sentiment this month. May\u2019s reading of 45 missed projections calling for an unchanged 51 from April while tanking to well below the contraction-expansion threshold of 50. Additionally, it was the lowest figure since January\u2019s 44. The index\u2019s components all declined with the traffic of prospective buyers and the outlook for sales in the present and in the next six months coming in at 30, 51 and 51 from April\u2019s 34, 57 and 60. All regions also saw figures move lower, with the Northeast, Midwest, South and West falling to 58, 49, 45 and 36 from 65, 50, 50 and 48.<\/p>\n\n\n\n Sticky mortgage rates sporting a 7 handle didn\u2019t just ruin moods: lofty costs of capital also slowed construction activity as well as plans for future builds. April\u2019s pace of building permits fell 3% month over month (m\/m) to a fresh yearly trough of 1.44 million seasonally adjusted annualized units (SAAU) from 1.47 million in May. Last month\u2019s figure also missed estimates of 1.48 million, while reaching the lowest level since 2022. The weakness was led by multi-family which dropped 9.1% m\/m while single-family slipped just 0.9%. Regionally, contractions in the Midwest and West of -18.1% and -14.4% m\/m overwhelmed slower growth rates of 5.5% and 4.2% in the Northeast and South.<\/p>\n\n\n\n Shovels in the ground did recover slightly but remain well below trend. April\u2019s rate of housing starts rose 5.7% m\/m to 1.36 million SAAU from March\u2019s 1.29 million but arrived beneath the anticipated 1.42 million. In contrast to permits, multi-family posted a sharp recovery of 31.4% m\/m while single-family declined a modest 0.4%. Strength in the Midwest and South characterized by m\/m growth rates of 19.1% and 10.1% offset the sluggishness from the Northeast and West, which saw activity drop 22.6% and 2.5%, respectively.<\/p>\n\n\n\n The labor market remains well-behaved despite last week\u2019s report featuring a frightening spike in layoffs. This morning\u2019s print brought us back to trend levels, with initial unemployment claims dropping to 222,000 for the week ended May 11 from 232,000 the week before. The figure arrived near estimates of 220,000. Continuing unemployment claims for the week ended May 4, meanwhile, rose to 1.794 million from 1.781 million the week before, landing above the forecasted 1.780 million. Four-week trends remained anchored, with the moving average for initial claims shifting from 215,250 in last week\u2019s report to 217,750 as of this morning. Continuing claims modestly went the other way, with the week to week four-week moving averages moving south from 1.780 million to 1.779 million.<\/p>\n\n\n\n While the three major moving averages reached fresh all-time highs earlier this morning, anecdotal evidence suggests that small-cap investors and bond traders are sporting frowns right outside of the trading floor. Indeed, the Nasdaq Composite, S&P 500 and Dow Jones Industrial indices are trading higher by 0.3%, 0.2% and 0.2%. The rate-sensitive Russell 2000 is lower by 0.3%, however, as yield watchers acknowledge that yesterday\u2019s inflation print was nowhere near the Fed\u2019s 2% target, despite it arriving below projections. Sectoral breadth is split and defensively tilted as equity investors are unsure about more all-time highs. Six out of eleven sectors are up with consumer staples, financials and utilities leading; they\u2019re up 1.5%, 0.5% and 0.4%. Materials, industrials and consumer discretionary are piloting the laggards with the segments moving lower by 0.4%, 0.2% and 0.1%. In fixed-income and currency land, yields and the dollar are paring yesterday\u2019s move, with rates on the 2- and 10-year Treasury maturities moving north by 5 and 2 basis points (bps) to 4.78% and 4.37%. The greenback\u2019s index is loftier by 17 bps as the US currency gains relative to all of its major counterparts except for the yuan. It\u2019s higher relative to the euro, pound sterling, franc, yen and Aussie and Canadian dollars. Over in the commodity space, WTI crude oil is up 0.3%, or $0.21, to $79.01 per barrel as a decline in stateside inventories motivates buying activity. Copper and gold are down 1.1% and 0.2%, however, as higher rates dampen manufacturing prospects while investors take a break from scooping up the safe-haven asset.<\/p>\n\n\n\n While market players wonder if yesterday\u2019s bullish move was an overreaction, economists are sharpening their pencils to gauge the health of the consumer on the back of yesterday\u2019s retail sales disappointment. This morning\u2019s big earnings beat from Walmart provides further evidence of households flocking to lower-cost providers of consumer staples, as the company is gaining market share in physical stores. The supercenters are also testing Amazon\u2019s domination, with the firm growing its e-commerce business impressively. While the story of Walmart’s stock reaching a fresh all-time high today is an excellent one for the company’s shareholders, important questions to ponder are whether this development will weigh on overall corporate revenues, and if Walmart’s market share gains point to consumers being on their last leg.<\/p>\n\n\n\n![\"Home](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/HMI-5-16-24.png\")
<\/figure>\n\n\n\nPlans of Future Construction Decline<\/strong><\/h2>\n\n\n\n
![\"Housing](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/Housing-Starts-5-16-24.png\")
<\/figure>\n\n\n\nConstruction Activity Remains Weak<\/strong><\/h2>\n\n\n\n
Layoffs are Tempered<\/strong><\/h2>\n\n\n\n
![\"Unemployment](\"\/campus\/wp-content\/uploads\/sites\/2\/2024\/05\/Unemployment-Claims-5-16-24.png\")
<\/figure>\n\n\n\nStocks Smile, Bonds Frown<\/strong><\/h2>\n\n\n\n
Is More of Walmart Econ Positive?<\/strong><\/h2>\n\n\n\n