Mortgage applications for the week ended July 6 rose 2.5%, ending two weeks of declines.  Purchase applications rose 7%, as more houses were listed on the market.  Higher prices may be drawing sellers out of the woodwork (pun intended).  The Refinance Index declined 4% to the lowest level since December 2000 (the results were adjusted for the Fourth of July holiday).  The average interest rate for a 30-year fixed rate mortgage was 4.76%, down from 4.79%.  Inventories remain tight, but the pace of the decline in inventories is slowing.  A trend needs to slow before it can reverse.  

Producer Price Index

Inflation is starting to creep higher according to the Labor Department’s June Producer Price Index (PPI). 

June PPI rose 0.3% led by the cost of services and motor vehicles.  In the twelve-month period ending in June, PPI advanced 3.4%; this was the largest annual gain since November 2011.  Comparatively, in the same period ending in May, prices rose 3.1%.  This should come as no surprise considering almost every report in the past month has mentioned higher input prices.  Tomorrow, we get a read on consumer prices (CPI).

Crude

The U.S. Energy Information Administration (EIA) released its crude oil inventories data for the week ended July 6.  The report showed a draw of 12.6 million barrels, which is 4% below the five-year average at this time of year.  Analysts surveyed by S&P Global Platts had forecasted a decline of 4.8 million barrels.  Crude initially trimmed some of its losses after the report showed a larger build than expected, but it quickly resumed its decline.  Currently, crude is down $2.02 (2.73%) to $72.06.  Crude was under pressure on news that Libya’s National Oil Corp removed a force majeure on its eastern oil ports. Estimates are that approximately 750,000 barrels a day will come back on line. 

The additional tariff news may also be pressuring crude as analysts believe that China may impose a greater tax on commodities imported from the U.S.  In the first quarter of 2018, China was the second largest importer of U.S. crude.            

Possible tariffs on flooring and furniture has stocks in the home furnishing business reeling today. 

• Restoration Hardware (RH) is down 6%
• Floor & Décor (FND) is down 7%
• At Home (Home) is down 9%

Although equities are lower today, they are trading in a tight range.  The Dow is currently down 200 points and has had an intraday range of approximately 100 points.  The markets are taking the news in stride as they digest the 205-page potential tariff report.  Rebuttal comments are due on August 30.

Tomorrow, we will share with you the secret method we mentioned in this morning’s Hotline report.