10AM Hour: The Market's Inflation Worries, Google I/O Takeaways, & Navigating Record Mortgage Rates 5/19/26

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Carl Quintanilla (1:06)

Good Tuesday morning, welcome to Squawk on the Street. I'm Carl Quintanilla with David Faber, Sara Eisen at Post 9 of the New York Stock Exchange. Coming up this hour, the three-headed threat facing the market. We'll talk to Morgan Stanley's Jim Lacamp about the factors that could tame the bull run. Is a rotation from the chips to software just getting started? We'll look at what's driving one of the most consequential moves in the market right now. And Google's IO starts today. Updates expected around AI.

One expert says the company has disappointed on the Frontier AI performance, even though the stock has been a winner. Let's get some pending homes with Diana Olick this morning. Hey, Diana.

Diana Olick (1:42)

Good morning, Carl. Pending home sales rose 1.4% in April compared with March and were 3.2% higher year over year that according to the realtors. And it's pretty much in line with expectations. Regionally, pending sales were higher month to month everywhere, except in the South. Now, this count is based on signed contracts. That's people out shopping in April when mortgage rates actually fell back a little bit from their March highs. Rates sparked at the onset of the Iran War. Now, the realtors' chief economist, Lawrence Youn, said in a release that buyers are coming out with cautious optimism despite increasing economic uncertainty and a slight rise in mortgage rates. He said demand will easily be even higher once mortgage rates retreat to the levels they were earlier this year. But unfortunately, rates have been rising again recently now with the 30-year fix at 6.68%, according to Mortgage News Daily. That is the highest level since last July and higher than that recent spike in March. Sara.

All right.

Carl Quintanilla (2:40)

Diana, thank you very much. Diana, David, watching some of those mortgage rates, as we pointed out yesterday with Jim, higher today than they were in September when the Fed embarked on a cycle of three cuts.

David Faber (2:51)

Yeah. I mean, we keep an eye, as we said during the last hour, on the 30-year plus the 10-year as well at 4.66. And by the way, shares of Home Depot, for example, after a decent quarter, but certainly one of those stocks, Carl, that we focus on in part because of the relationship to the housing market and hence to interest rates as well.

Sara Eisen (3:09)

I just want to talk about inflation, because I think that's a big part of the move here, what's happening with bond yields. And surveys show that there are increasing worries, both on Wall Street and Main Street, about inflation. So let's just start with the Bank of America Fund Manager Survey, which looks at the pros. And what you see is that now they say the biggest risk is the second wave of inflation here.

That's a big increase, the 45% of fund managers who say that. It was up from 26% last month. And then interestingly, geopolitical conflict actually comes down in terms of a high risk. 20% say geopolitical conflict, that's down from 44% in April. And that was the number one headwind from last month. If you look also at consumer surveys, we just got one out this morning from UBS, they also show inflation as the top risk in terms of factors negatively impacting consumers' views of the economy. 51% say inflation, obviously some of the other risks there that consumers say impact their spending.

David Faber (4:10)

I mean, Iran conflict and tariffs go into inflation.

Jim Cramer (4:13)

Shouldn't they all be together?

Sara Eisen (4:14)

Yeah, it's all kind of, you know, what the consumer is answering.

David Faber (4:17)

If you're worried about one, you're worried about the other.

Sara Eisen (4:19)

But the bigger question is, you're worried about it, does it actually influence what you're doing on spending? Because so far, it's been sort of a good story on spending. Even Home Depot said that they didn't see much of a change in the overall environment from last quarter. But the longer this lasts and the more it impacts sentiment, you know, that's cause for concern and probably has a lot to do with why we're seeing these bond yields make fresh, you know, multi-year highs. And I'll just leave you with what's happened actually on inflation with some key categories of commodities since the war in Iran. Jet fuel, we know, airlines have gone, airfares have gone up. Why? Look at jet fuel, 74 percent since the war began. There's crude oil prices up more than 60 percent.