Dow jumped 211 (150 below session highs) to yet another record, advancers over decliners 3-2 & NAZ surged 326, going over 13K to a new record. The MLP index rose 3+ to the 152s & the REIT index was about even at 361. Junk bond funds were flattish & Treasuries remained weak, offering higher yields. Oil climbed to 51 (another high since Feb) & gold went up 6 to 1915 (more on both below).
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
After a strong surge in home sales over the past 6 months, suddenly consumers are concerned about the health of the housing market. Buyers & sellers felt are significantly less confident about making a deal in Dec, according to a monthly survey by Fannie Mae. The percentage of survey respondents who said it was a good time to buy a home fell to 52% from 57%, while the percentage who said it was a bad time to buy increased to 39% from 35%. On the sell s ide, just 50% said it was a good time to sell, down from 59% the previous month. Respondents who said it was a bad time to sell rose to 42% from 33%. “The sell-side component fell for the first time since April, reversing most of the increases of the past three months and implying to us that, at least temporarily, potential home sellers might wait to list their homes,” said Doug Duncan, chief economist at Fannie Mae. “If so, this could have the effect of perpetuating already-tight inventory levels and supporting additional (albeit lesser) home price growth, which could contribute to a further moderating of home sales.” Consumers are feeling less confident about the housing market because they are also feeling less sure about the US economy. More respondents said they were concerned about keeping their jobs while fewer said their household income had increased substantially. Consumers are also likely reacting to the sharp rise in home prices, brought on by high demand & record-low supply of houses for sale. Prices are seeing the biggest gains in 6 years, up 8.2% in Nov. Nationally, the number of homes for sale was down 39.6% in Dec, year over year — that amounts to 449K fewer homes for sale than Dec 2019. Home sales have started to fall over the past few months, even as mortgage rates set multiple record lows. Rates will likely stay down but not go any lower, given the new leadership in both the White House & Congress. With gov spending expected to rise significantly, bond yields are already heading higher. Mortgage rates loosely follow the yield of the US 10-year Treasury.
Buyers and sellers are substantially more pessimistic about the housing market
The US economy may soon experience higher inflation than has been seen for quite some time, said St. Louis Federal Reserve Pres James Bullard. Bullard also said he thinks the economy is going to recover “quite a bit faster” than most economists expect. On inflation, Bullard said his bank has gotten reports of supply constraints of various kinds that are intense & led to big increase in prices. “The quiescence of inflation that has characterized the last decade may not be a good guide for what’s going to happen in 2021, where I would expect more volatile pricing, possibly higher inflation than we’re used to,” Bullard added. Treasury yields have been rising in the past few weeks with investors expecting the economic recovery from the coronavirus pandemic will lead to higher inflation. The latest Federal Reserve forecast basically sees the economic recovery taking 3 years, but many forecasters, including some Fed officials are worried the economy will stumble in the current qtr. However, Bullard said said he thinks Q4-2020 GDP growth will be stronger than expected & this will carry over into this year. Bullard noted he thought that households have saved a fair amount last year & this will be able to tide them over in the first few months of this year. “So I actually think we’ll be ok through the first quarter and then from there, we’ll see how the vaccines are able to limit the health crisis,” he said, & he expects a successful roll-out of the vaccines. “I think things are going to better than are typically forecast and that the recovery will occur quite a bit faster than most forecasters have in mind,” Bullard said. The St Louis Fed pres said it was premature to discuss when the Fed might start to taper its asset purchase program. The Fed has told the market it will continue its purchases of $120B of Treasuries & mortgage-backed securities until it sees “substantial progress” toward its goal of full employment & 2% inflation. Bullard added that there is a lot of uncertainty remaining about the economic outlook due to the pandemic. “It would be inappropriate to tie things down to a specific date,” he said.
Fed’s Bullard says inflation may be ‘higher than we’re used to’ this year
Gold futures scored a partial rebound, day after rising US bond yields prompted the metal, which doesn't offer a coupon, to post its first loss in six sessions. Commodity dealers are betting that the longer-term outlook for gold is higher, with a Democratically controlled Congress likely to champion greater gov spending to reflate the economy which is bullish for gold prices. Feb gold rose $5 (0.3%) to settle at $1913 an ounce. Yesterday, prices settled 2.3% lower, but not before tapping a high of $1962.
Gold scores partial rebound a day after bond yield rise pressured prices
American Express (AXP), a Dow stock, shares fell after a report said that the investigative arms of 3 US financial agencies were probing the card issuer’s sales practices. The
offices of the inspectors general of the Federal Reserve, Treasury
Dept & Federal Deposit Insurance Corp are looking into whether AXP pushed its cards on small business clients with
misleading tactics & whether customers were harmed. Citing current or former workers, the report said in Mar in an effort to boost sales, some AXP employees
misrepresented card rewards & fees or issued cards that customers
hadn't sought. The company said that it has
“robust compliance policies & controls in place, and [does] not
tolerate misconduct.” The firm added that it has been cooperating with
regulators’ review of small business card practices that occurred in
2015 & 2016. “We have conducted a detailed, independent review
of these sales from this time period, and found no evidence of a pattern
of misleading sales practices,” AXP said. “The commercial acquisition
group responsible for these sales represented approximately 0.25 percent
of the 65 million total new cards American Express acquired worldwide
between 2014 and 2019. We take these matters seriously, and will
continue to cooperate with our regulators.” The stock fell 91¢.
If you would like to learn more about AMX, click on this link:
club.ino.com/trend/analysis/stock/AMX?a_aid=CD3289&a_bid=6ae5b6f7
AmEx shares dip on report that U.S. investigators are probing sales practices
Oil futures rose to post a 3rd straight session gain, buoyed by data showing a larger-than-expected weekly drop in US crude inventories & a recent pledge by Saudi Arabia to further cuts its production levels. West Texas Intermediate crude for Feb rose 20¢ (0.4%) to settle at $50.83 a barrel. Mar Brent, the global benchmark, added 8¢ to close at $54.38 a barrel. Crude oil markets yesterday shrugged off events in DC when a violent mob disrupted the Congressional debate on the confirmation of Joe Biden as pres from Jan 20. ? Biden was confirmed in the early hours today after Dems won control of Congress in 2 run elections for the Senate yesterday. Oil had rallied yesterday after the Energy Information Administration reported that US crude inventories fell by 8M barrels last week. That compared with the decline of 1.2M barrels forecast.
Oil posts a third straight gain as U.S. crude supply drop, Saudi output cut provide tailwind
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