Registered Investment Adviser Caleb Lawrence
A surprise jump in interest rates sent the markets reeling into the final hour and dragging down most commodities as well, despite generally positive economic data.
The New York regional manufacturing index increased 4.3 points to 20.1 in May, on strength in new orders and employment. Price data increased and remains high.
Retail sales advanced .3% in April, driven by tax cuts and matching expectations. On a year ago basis sales increased 4.3% led by gasoline and internet sales.
Subprime auto loan default rates continue to rise, having recently hit a 6th consecutive new high in the post financial crisis period. With the 60-day delinquency rate hitting 5.8% in April, slightly higher than the 5.6% seen a year ago. In comparison this rate reached just over 5% during the depths of the previous crisis. With loan securitization levels at or exceeding that seen in 2007, the banks while not exposed directly to anywhere near the extent they were than have considerable indirect exposure compliments of the loans they made to the companies that do have direct exposure. Once again, we have a data point directly at odds with the narrative about the great economy and employment market. It’s also worth noting that record debt levels and higher interest rates are a toxic combination, ala 2008 and 1929.