U.S. Housing Market Shows Unexpected Strength in June
The U.S. housing market demonstrated surprising resilience in June, with housing starts jumping to an annualized rate of 1.321 million. This figure significantly surpassed both the previous month's 1.256 million and the estimated 1.290 million, representing a 4.6% month-over-month increase after a -9.8% decline in May. Building permits also showed a slight uptick, reaching 1.397 million in June, compared to 1.394 million in the prior month and estimates of 1.390 million. This positive data indicates a modest pickup in construction activity, serving as a leading indicator of future projects and spending.
Treasury Yields React to Housing Data with Slight Dip
In the wake of the stronger-than-expected housing starts, U.S. Treasury yields experienced a slight decline. The 10-year U.S. Treasury yield fell by 3 basis points to 4.434%. Similarly, the Two-Year U.S. Treasury Yield dropped slightly to 3.882%. This movement suggests that while the housing data was robust, market participants may be interpreting it within a broader context of economic conditions that could still warrant accommodative monetary policy or that the data was not strong enough to signal a significant shift in Fed expectations.
Fed's Waller Signals Readiness for Rate Cut, Warns on Tariffs
Federal Reserve Governor Jerome Waller delivered extensive remarks, indicating a readiness for a potential interest rate cut. He stated that while it's "probably not critical" to wait an additional six weeks for a rate cut, there is "no real reason to hold off" either. Waller emphasized the importance of the Federal Reserve Chair maintaining credibility with financial markets to prevent inflation expectations from rising. He also noted that he is "not seeing longer-term inflation expectations go up."
Waller further cautioned about the economic impact of ongoing trade disputes, asserting that "tariffs are a tax" and that a "constant sequence of tariffs could cause rolling impact" on the economy and markets. He highlighted the need to examine inflation trends over the past three and six months in relation to tariffs. Regarding the labor market, Waller described headline numbers as "OK" but expressed concern that the private sector is "not doing as well as people think," suggesting it "would take little to disrupt the job market." He also mentioned that business executives are reporting neither significant hiring nor firing. Waller has indicated he will not commit to a dissent on the interest rate vote ahead of the July meeting, reiterating that he couldn't be "any more clear on rate position."
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.