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Stocks Pop on Better-Than-Expected Inflation Report
• All major averages jumped yesterday, driven higher by a better-than-feared inflation report. The July consumer price index advanced 8.5% on an annual basis and was unchanged compared to June. Dow Jones economists were expecting increases of 8.7% and 0.2%, respectively. Investors sent shares of major tech companies higher. Big banks also got a boost.
• Meanwhile, the CBOE Volatility Index fell below 20 yesterday and is now trading at its lowest levels since April. Wall Street’s “fear gauge,” tends to spike when investors feel uncertain about the future so the drop highlights the collective sigh of relief felt on The Street yesterday.
What to Be on the Lookout for Today
• Jobless claims will be published as the robust labor market is showing signs it may be cooling. Last week, the number of people filing for unemployment benefits rose to 260,000 which is near an eight-month high. July’s Producer Price Index is also due, which tracks wholesale prices. Surging energy prices contributed to an 11.3% rise in June’s PPI, a near record.
• Automaker Rivian (RIVN) is set to report earnings. The EV company recently expressed disappointment over the proposed climate spending package being debated in Congress, saying it would put them at a disadvantage.
The Differences Between Fixed-Rate vs. Adjustable-Rate Loans
When it comes to understanding types of mortgage loans, the difference between an adjustable-rate mortgage and fixed-rate mortgage is the first thing to consider.
Fixed-rate mortgage loans are exactly what they sound like: The interest rate is fixed for the entire life of the loan. The term can vary.
These loans offer a steady monthly payment and relatively low-interest rate. Borrowers can usually make extra payments toward the principal if they want to pay off the mortgage faster, as prepayment penalties are rare.
• Pro: The monthly payment is fixed, and therefore predictable.
• Con: If you take out a fixed-rate loan when interest rates are high, you’re locked into that rate for the entire term — unless you’re able to refinance later and get a lower rate.
An adjustable rate mortgage (ARM) has an interest rate that fluctuates after an initial fixed-rate period of months to years. The variable rate is typically tied to a benchmark index rate that changes with market conditions.
• Pro: The initial interest rate of an ARM is usually lower than the rate on a traditional fixed-rate loan.
• Con: Rate increases in the future could be dramatic, typically leaving many adjustable-rate mortgage holders with higher monthly payments than if they had committed to a fixed-rate mortgage.
As you weigh the pros and cons of the various types of loans, consider getting prequalified for a mortgage with SoFi. View your rate in two minutes.
A Few Headlines That Should Be on Your Radar
July CPI showed one month of cooling. One month does not make a trend, but we have to start somewhere. SoFi’s Head of Investment Strategy thinks this is a decent start. We can’t decidedly declare victory with inflation still at 8.5%, but we can look at prior inflation regimes and see how the market did during each to try to understand the risk/reward as investors. Read more >> Household debt is on the rise, as Americans continue to face inflated prices. Credit card debt spiked by 13% in the second quarter — the biggest jump in over 20 years. Between student loans, car loans, mortgages, and even smaller loans like financed cell phones, it's enough to leave you stressed. But we’ve got some tips and tricks to help overcome debt. Read more >> What is “labor hoarding” and is it skewing our sense of the job market? An analysis of the trend could explain how this economic downturn is different from the 2008 financial crisis. Shortages of every kind are on the minds of employers after the last two years of lockdowns and supply chain snarls. Some are betting it’s better to hold on to employees rather than lay them off. Here’s what that could mean for the job market overall. Read more >> Hiring a knowledgeable mortgage lender is one of the first steps you’ll take on your journey to homeownership. Here are some questions to ask a mortgage lender to help inform your decision. Read more >>Not-So-Breaking News
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Wendy's (WEN) reported weaker-than-expected sales for the second quarter. Higher labor and commodity costs along with a lower overall customer count weighed on the fast food giant's margins.
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Jack in the Box (JACK) shares fell after the company missed profit projections during the second quarter. With that said the fast-food burger chain posted revenue and same-store sales figures that beat expectations mostly due to higher pricing.
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Increased advertising pricing and continued growth at Tubi helped Fox (FOX) increase revenue by 5% on an annual basis. CEO Lachlan Murdoch said the company is "aware of the chatter around advertising headwinds" but at the moment is not seeing an adverse impact on the business.
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Paysafe (PSFE) shares fell in morning trading yesterday after the company cut its full-year forecast. The payments firm is facing headwinds due to current macroeconomic conditions, which is leading to a decline in its market capitalization.
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Life Time Group (LTH) beat on top and bottom lines during the second quarter. With that said, the fitness, family recreation and spa centers operator missed on same-store sales and provided a downbeat outlook, which weighed on its shares.
Financial Planner Tip of the Day
"First-time home buyers can be bamboozled by the true cost of buying a home because there’s a lot more to consider than just principal and interest. Before buying a home, you should crunch and become familiar with the numbers for the total cost of your mortgage, including insurance, taxes, fees, bills, furniture, and so on. Only with a good grasp of what each line item will run can you make an estimate about the size of the mortgage, and therefore the home you can afford to buy.”
Brian Walsh, CFP® at SoFi