There is some good news in the lumber market: contracts have plunged more than 14% in recent weeks, reversing highs last seen during the pandemic shortages. The sharp reversal comes as bets on tariff-driven cost pressures and lower interest rates failed to lift demand. At the same time, disappointing housing data and weak earnings across the housing industry underscored the trouble festering. 

Traders ramped up bets that U.S. tariffs on Canadian imports and lower interest rates would lift costs and demand, but housing activity has failed to deliver any demand tailwinds.

There has been weak builder confidence (hitting 13-year lows), disappointing housing permits, and earnings misses at Home Depot, James Hardie Industries, Builders FirstSource, and UFP Industries.

Earlier today...