Dow pulled back 142 after yesterday's rally, decliners over advancers 3-2 & NAZ l;ost 52. The MLP index rebounded 3+ to the 248s & the REIT index went up 3 to the 353s. Junk bond funds drifted lower & Treasuries were purchased, bringing lower yields. Oil added 1 to the 51s & gold rose 3 to 1226.
AMJ (Alerian MLP Index tracking fund)
US stocks mixed ahead of Trump meeting with Xi
Expectations for a stronger housing market in Oct fell short. Pending homes sales, a measure of signed contracts to buy existing homes, fell 2.6% compared with Sep, according to the National Association of Realtors (NAR). Sales were down a steeper 6.7% compared with Oct 2017, the 10th straight month of annual declines. This follows another disappointing report on sales of newly built homes in Oct, which also measure signed contracts. They fell 12% annually, according to the US Census. Experts blame the weakness on weakening affordability across the nation's local markets. "The recent rise in mortgage rates have reduced the pool of eligible homebuyers," said Lawrence Yun, chief economist for the Realtors group. The same thing happened after rates jumped in 2013, following the Taper Tantrum, when the Federal Reserve indicated it would reduce the amount of money it was putting into the economy. Mortgage rates surged, but then fell back again & home sales recovered. "But this time, interests rates are not going down, in fact, they are probably going to increase even further," added Yun. The average rate on the 30-year fixed mortgage is now about a full percentage point higher than it was a year ago, hovering around 5%. Home sales today are at the level they were in 2000, but interest rates are still lower than they were then. The weakness is not just rates, but high home prices. Home values surged dramatically in the last 2 years, as demand outpaced supply, especially on the lower end of the market. While all regions saw a decline, pending sales in the West fell furthest, down 8.9% & down 15.3% compared with a year ago. Sales in the Northeast rose 0.7% & were 2.9% lower annually. In the Midwest, sales fell 1.8% monthly & 4.9% annually. Sales in the South were 1.1% lower monthly & 4.6% lower annually.
Pending home sales drop 2.6% in October for 10th straight month of annual declines
US consumer spending surges, while underlying inflation slows
US weekly jobless claims rise to 6-month high
The chart below shows the outstanding advance made by the Dow this week. Today calmer heads are reevaluating the sharp advance, even questioning what Powell really meant about the future of rate hikes. For the time being, Trump's meeting with Xi is the main concern for traders & nobody knows what will come from their talks. In the meantime, the Dow is vastly overbought this week. Profit taking is in order which is happening already.
Dow Jones Industrials
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 49.74 | -0.55 | -1.1% |
| GC=F | Gold | 1,225.20 | +1.60 | 0.1% |
Stocks opened mixed as investors
awaited the outcome of a meeting between Pres Trump & Chinese
Pres Xi Jinping that could ease trade tensions between the world's 2 biggest economies -- or make them even worse. The
planned Sat meeting on the sidelines of the G20 summit in
Argentina is expected to focus on tariffs being placed by Trump on
Chinese goods. Such tariffs are blamed for higher prices on consumer
goods for Americans. Economic news was mixed Today. The gov said US consumers spent the most in 7
months during Oct. Spending jumped 0.6% as households paid
more on prescription drugs & utilities, topping expectations of 0.4%. Personal incomes increased 0.5%, the largest gain since Jan. Yesterday, the Dow
jumped 617 (2.5%) registering the best 3-day
gain since 2016. The S&P 500 & the
NAZ also jumped over 2% a piece. “We
know that moving too fast would risk shortening the expansion. We also
know that moving too slowly – keeping interest rates too low for too
long – could risk other distortions in the form of higher inflation or
destabilizing financial imbalances. Our path of gradual increases has
been designed to balance these two risks, both of which we must take
seriously” said Powell in prepared remarks. In economic news, the 2nd revision to Q3 GDP came in as expected, unchanged at 3.5% & trailed Q2 growth of 4.2%. In Asian markets today, China's Shanghai
Composite was 1.4% lower & Hong Kong's Hang Seng fell 0.9%. Japan's Nikkei average gained 0.8%. In Europe, London's FTSE is up 0.6%, Germany's DAX gained 0.1% & France's CAC added 0.4%.
US stocks mixed ahead of Trump meeting with Xi
Expectations for a stronger housing market in Oct fell short. Pending homes sales, a measure of signed contracts to buy existing homes, fell 2.6% compared with Sep, according to the National Association of Realtors (NAR). Sales were down a steeper 6.7% compared with Oct 2017, the 10th straight month of annual declines. This follows another disappointing report on sales of newly built homes in Oct, which also measure signed contracts. They fell 12% annually, according to the US Census. Experts blame the weakness on weakening affordability across the nation's local markets. "The recent rise in mortgage rates have reduced the pool of eligible homebuyers," said Lawrence Yun, chief economist for the Realtors group. The same thing happened after rates jumped in 2013, following the Taper Tantrum, when the Federal Reserve indicated it would reduce the amount of money it was putting into the economy. Mortgage rates surged, but then fell back again & home sales recovered. "But this time, interests rates are not going down, in fact, they are probably going to increase even further," added Yun. The average rate on the 30-year fixed mortgage is now about a full percentage point higher than it was a year ago, hovering around 5%. Home sales today are at the level they were in 2000, but interest rates are still lower than they were then. The weakness is not just rates, but high home prices. Home values surged dramatically in the last 2 years, as demand outpaced supply, especially on the lower end of the market. While all regions saw a decline, pending sales in the West fell furthest, down 8.9% & down 15.3% compared with a year ago. Sales in the Northeast rose 0.7% & were 2.9% lower annually. In the Midwest, sales fell 1.8% monthly & 4.9% annually. Sales in the South were 1.1% lower monthly & 4.6% lower annually.
Pending home sales drop 2.6% in October for 10th straight month of annual declines
US consumer spending increased by the most in 7 months in Oct, but underlying price pressures slowed, with an
inflation measure tracked by the Federal Reserve recording its smallest
annual increase since Feb. The Commerce Dept said consumer spending, which accounts for more than 2/3 of
US economic activity, jumped 0.6% last month as households
spent more on prescription medication & utilities. Data for Sep was revised down to show spending rising 0.2% instead of the previously reported 0.4% gain. The forecast called for consumer spending increasing 0.4% in Oct. When
adjusted for inflation, consumer spending advanced 0.4%, also the
biggest gain in 7 months & pointing to a solid pace of
consumption at the beginning of Q4. Despite the strong
consumer spending, there are indications that economic growth is
slowing. Data this month suggested a moderation in business spending on
equipment, a deterioration in the trade deficit as well as further
weakness in the housing market. Growth estimates for Q4
are currently around a 2.5% annualized rate. The economy grew at a
3.5% pace in the Jul-Sep qtr. In Oct, spending on
goods surged 0.5% after gaining 0.1% in Sep while outlays
on services shot up 0.7% after rising 0.3% the prior
month. There was a slowdown in price gains last month. The
personal consumption expenditures (PCE) price index excluding the
volatile food & energy components edged up 0.1% after
increasing 0.2% in Sep. That lowered the
year-on-year increase in the so-called core PCE price index to 1.8%, the lowest reading since Feb, from 1.9% in
Sep. The core PCE index is the Fed's preferred inflation measure. It hit the central bank's 2% inflation target in Mar for the first time since 2012. The moderation in
inflation will probably not change expectations that the Fed will raise
interest rates next month for the 4th time this year. Fed Chair Jerome Powell yesterday appeared to signal the central bank is nearing an end to
its interest-rate hikes, saying its policy rate was now "just below" a
level that neither brakes nor boosts a healthy economy. Last month, personal
income increased 0.5%, the largest gain since Jan, after
rising 0.2% in Sep. Wages rose 0.3% in Oct.
Savings slipped to $967.8B last month from $976.9B in
Sep.
US consumer spending surges, while underlying inflation slows
The number of Americans filing applications for
jobless benefits increased to a 6-month high last week, which could
raise concerns that the labor market could be slowing. Initial claims for state unemployment
benefits rose 10K to a seasonally adjusted 234K for the latest week, the highest level since the mid-May, the Labor Dept said. Claims have now risen for 3 straight weeks. The forecast called for claims falling to 220K. The claims data included
Thanksgiving Day on Thurs & claims tend to be volatile around
holidays. The 4-week moving
average of initial claims, considered a better measure of labor market
trends as it irons out week-to-week volatility, rose 4K to 223K
last week. The claims report also
showed the number of people receiving benefits after an initial week of
aid increased 50K to 1.71M for the latest week. The 4-week moving average of the continuing claims rose 19K
to 1.68M. The continuing claims data covered the week during which households
were surveyed for Nov's unemployment rate. The 4-week average of
claims increased 21K between the Oct & Nov survey weeks,
suggesting little change in the unemployment rate. The jobless rate is at a near 49-year low of 3.7%. The labor market is viewed as being near or at full employment.
US weekly jobless claims rise to 6-month high
The chart below shows the outstanding advance made by the Dow this week. Today calmer heads are reevaluating the sharp advance, even questioning what Powell really meant about the future of rate hikes. For the time being, Trump's meeting with Xi is the main concern for traders & nobody knows what will come from their talks. In the meantime, the Dow is vastly overbought this week. Profit taking is in order which is happening already.
Dow Jones Industrials
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