LIVE MARKETS-Fed day data: Interest rates and demand

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FED DAY DATA: INTEREST RATES AND DEMAND

Data released on Fed Decision Day usually takes the back seat to the main event, and this morning's offerings are no different. But they do offer Warsh & Co some clues about the demand side of the supply/demand inflation story.

Starting with the housing market, the average 30-year fixed contract rate USMG=ECI shed 4 basis points to 7.37% last week, according to the Mortgage Bankers Association. That was enough to coax would-be borrowers from the sidelines.

Demand for loans to purchase homes USMGPI=ECI —considered a housing market coal mine canary — rose by 3.8%. Refi applications USMGR=ECI — which accounted for a 38.9% share of the mortgage pie — increased by 2.7%.

Combined, home loan demand perked up by 3.4% last week.

"The decline in rates gave borrowers some relief, with applications rebounding slightly,” writes Joel Kan, MBA’s deputy chief economist. "Many homebuyers have put their purchase plans on hold. Similarly ... most borrowers have little to gain from refinancing."

The 30-year fixed rate, which has been soaring north of 7% since mid-September and above 6% for well over four years, has been blamed by homebuilders and realtors for the affordability crisis weighing on the sector.

The rate currently sits just 1.1 percentage points above where it was during the same week a year ago.

Over that same period, purchase applications have decreased by 21.4%, while refi demand has plunged 62.1% in the last 12 months.

MBA's mortgage demand data, while fairly fresh, is still last week's news.

Housing stocks, on the other hand, reflect where investors expect the sector to be six months to a year in the future.

With that in mind, investors' view of the sector is fairly grim.

Both the S&P 1500 Homebuilding Index .SPCOMHOME and the PHLX Housing Sector Index .HGX handily outperformed the broader market in the first two months of the year, but that advantage evaporated in March with the onset of the Iran war, which pushed interest rates higher, taking mortgage rates with them.

Since then, the indexes have well underperformed the broader market.

So far this year, the SPCOMHOME and the HGX are now down 5.4% and 7.3%, respectively, compared with the S&P 500's .SPX 12.8% year-to-date advance.

Next, the Commerce Department released its advance take on goods trade balance USGBAL=ECI and wholesale inventories USAWIN=ECI for September.

The gap between the value of goods imported into the United States and those exported unexpectedly widened by 2.1% to $134.9 billion last month.

That's $4.7 billion more than analysts expected.

In detail, exports rose by 2.8%, with a 12.8% increase in food and beverages leading the charge, while a 5.6% drop in autos and a 1.6% decline in industrial supplies held the increase in check.

Imports, which account for the larger piece of the trade pie (and act as a GDP detractor), increased by 2.4%, led by a 7.5% jump in capital goods, which were partially offset by a 6.0% drop in imported capital goods and a 4.0% decline in autos.

Net trade has contributed to topline GDP only twice in the last 10 quarters.

"When demand exceeds supply, people turn to foreign substitutes for domestic goods," says Carl Weinberg, chief economist at High Frequency Economics. "The FOMC will pay attention to this result."

The value of goods stacked in the warehouses of US wholesalers rose by 0.6% last month, an increase over August's 0.5% growth.

Note: the trendline gap is due to the late 2025 government shutdown.

(Stephen Culp)

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