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WAR IS OVER: INDUSTRIAL OUTPUT, EMPIRE STATE, HOMEBUILDER SENTIMENT

Investors embarked on a holiday-shortened week with wind at their backs in the form of a U.S.-Iran peace deal, the re-opening of a certain strait that's been in the news lately, and a trio of mixed economic indicators

A report from the Federal Reserve shows industrial output USIP=ECI managed to eke out a 0.1% increase last month, marking an abrupt deceleration from April's upwardly revised 0.9% gain.

Estimates called for a 0.2% increase.

Manufacturing output growth delivered a fat zero, showing no change after the prior month's 0.7% growth.

Beneath the surface, more robust increases were seen in construction supplies (up 1.1%), motor vehicles/parts (growing 1.2%) and mining (rising 1.3%).

The 1.8% increase in the high tech segment offers yet another bit of evidence that AI-related outlays continue apace.

The loss of momentum suggests "the wave of preemptive inventory-building already had begun to break before this week’s US-Iran deal," writes Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "Many businesses have feared since February that the sudden closure of the Strait of Hormuz would trigger supply chain disruptions later this year, and so placed orders with manufacturers early."

Looking ahead, production will likely slip "as businesses stop placing new orders and allow their inventories to deplete gradually," Tombs adds. "The sustained rise in prices for manufactured goods also will undermine demand."

As expected, capacity utilization USCAPU=ECI -- a measure of economic slack -- tightened a tad, to 76.2% from 76.1%, its strongest reading since last July.

On a regional level, factory activity in New York State unexpectedly lost some oomph this month.

The New York Fed's Empire State index USEMPM=ECI slid 13.9 points to print at 5.7, a hasty retreat from May's 1-1/2 year high and plunging past the 14.0 reading analysts expected.

Even so, the index remains north of zero, the Empire State dividing line between expansion and contraction.

Below the surface, new orders and shipments posted their third straight monthly improvement. But "delivery times continued to lengthen, and supply availability continued to worsen," the press release says.

The prices paid index -- an inflation predictor -- was little changed at an elevated 61.0.

"Following strong growth in May, manufacturing activity in New York State increased modestly in June," says Richard Deitz, economic research advisor at the New York Fed. "Employment grew for the fifth straight month, but price increases remained elevated and supply availability worsened."

On Thursday, the Philadelphia Fed will release its Philly Fed manufacturing report, which should help connect the dots regarding Atlantic region factory activity during the month of June.

Crossing to the cloudier side of the street, the mood among homebuilders has grown increasingly sullen this month.

The National Association of Home Builders' USNAHB=ECI housing market index (HMI) surprised to the downside by shedding 2 points to 35, in defiance of economists who expected a repeat of May's 37 print.

The NAHB dividing line between optimism and pessimism in the sector is 50. The HMI has wallowed in pessimistic territory for more than two years now.

In NAHB's press release, chairman Bill Owens and chief economist Robert Dietz both point their fingers at regulatory policy, citing an in-house study that shows "government regulation, taxes, fees and other costs add more than 26% to the cost of an average single-family home."

Neither of them mentions the fact that the 30-year fixed mortgage rate has been coasting north of 6% since September 2022, according to data from the Mortgage Bankers Association. And while would-be buyers' uncertainties are likely to abate due to the end to the fighting between the U.S. and Iran, and with the reopening of the Strait of Hormuz likely leading to eventual inflation relief, this survey was taken before those developments and war-related uncertainties didn't merit a single mention in the press release.

(Stephen Culp)

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EARLIER ON LIVE MARKETS:

US STOCKS JUMP AS IRAN PACT SENDS OIL SLIDING; DOW EYES RECORD CLOSE CLICK HERE

AI CAPEX BOOM COULD WEIGH ON SHORT-TERM ROE FOR HYPERSCALERS, GOLDMAN WARNS CLICK HERE

BULLISH REVERSAL REIGNITES S&P 500’S RUN AT RECORD HIGHS CLICK HERE

EUROPE'S DATA CENTRE BOOM HITS A POWER WALL CLICK HERE

BARCLAYS RECOMMENDS ADDING TO GOLD EXPOSURE CLICK HERE

COPPER: THE ROUTE TO $15,000/TON CLICK HERE

HORMUZ AGREEMENT DEALS A STRAIT FLUSH TO MARKETS CLICK HERE

EUROPE BEFORE THE BELL: STOCKS SET FOR BIG JUMP ON HORMUZ AGREEMENT CLICK HERE

MARKETS CELEBRATE MOU ON SOH CLICK HERE