Daily Market Report 5/28/21

http://MikesDailyMarketReport.com:  We received the BIG report today and Markets are shrugging it off!  The Personal Consumption Expenditure (PC) jumped up 0.6% in April; whereas, it's YoY jumped from 2.3% in March to 3.6% in April.  When you exclude Food and Energy, then you have the Core PCE (which is what the Fed regards to "real inflation").  This jumped up 0.7% in April; and jumped up from 1.8% in March to 3.1% for April.  Typically, the Fed will keep this number at 2.0%; and even made a statement back in the Fall of 2020 that it will allow it to average at 2.5% for some time before making any adjustments.  Also, there have been debates that Inflation is transitory or permanent.  As we can see by these numbers, commodities spiked (even without the food and energy).  Other reports included Consumer Spending, which went up 0.5% in April; while it's counter-part, Personal Income dropped 13.1%.  However, Manufacturing in the Chicago region came in with it's 2nd highest number in it's history at 75.2 for May.  Lastly, Consumer Sentiment remained relatively Unchanged at 82.9 for May, as Consumers are feeling the Inflation numbers and are not happy about it.  Stocks are Up for the last day of the Month for trading and the Markets will close about an hour early for the long weekend holiday (Memorial Day weekend).  There's now a debate amongst the Fed, as there's been a lot of outward pressure about tapering.  Tapering, if you're not aware, is the decline of the purchases of Treasuries/MBS by the Fed.  This action (purchasing) has helped create liquidity in the Market, but also, has propped up Mortgage Rates (improved them) based on the Supply/Demand.  This was something that the Fed probably wasn't going to start the discussion until around after summer, but with all the talk by the Media and Investors, so now there are members whom are addressing their points of view on the topic during their speaking engagements.  Once the tapering begins, then expect MBS to drop and Mortgage Rates will begin to rise.  Fed Kaplan, member out of the Dallas Fed, mentioned that he felt it may be needed to help fix the excess in real estate; so, higher Mortgage Rates are needed (his sentiment).  The 2022 Budget is about to be released and it's looking closer to a $6 Trillion price tag.  MBS is shrugging off the Inflation data and is leaning toward it being transitory with it's trading today, as it's currently Up 3bps.  Typically, a number like this would spook the Market and there would be a BIG selloff, similar to what we saw about 2 weeks ago when we saw the CPI data.  Mortgage Rates remain Unchanged from yesterday's pricing.  Yields have bounced lower, after touching it's 25 DMA, and is sitting around 1.59%.

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