Dow dropped 189, decliners over advancers about 5-4 & NAZ was of 84. The MLP index added 2+ to the 189s & the REIT index was about even in the 423s. Junk bond funds hardly budged & Treasuries saw limited selling. Oil went up to about 66 & gold soared 26 to 1864.
AMJ (Alerian MLP index tracking fund)
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Strong buyer demand is keeping homebuilders confident, but rising costs of construction materials are weighing on housing affordability. Builder sentiment in the single-family housing market was unchanged at 83 in May, according to the NAHB/Wells Fargo Housing Market Index (above 50 is considered positive sentiment). The index had plummeted to 37 last May, as the pandemic lockdown hit & the housing market shut down. It then rebounded dramatically in Jun & Jul, as consumers rushed out to buy suburban homes, seeking more space for working & schooling from home. Builders now say they continue to see a steady stream of buyers, due in large part to the extreme shortage of existing homes for sale. Continued low mortgage rates are helping some with affordability, but with prices rising fast, purchasing power is weakening. “First-time and first-generation homebuyers are particularly at risk for losing a purchase due to cost hikes associated with increasingly scarce material availability,” said Chuck Fowler, National Association of Home Builders chair. Aggregate residential material costs are now up 12% year over year, according to the NAHB, & those costs continue to rise. That is causing a critical problem not just for builders, but for the overall market. “Some builders are slowing sales to manage their own supply chains, which means growing affordability challenges for a market in critical need of more inventory,” said Robert Dietz, NAHB's chief economist. “Homebuyers should expect rising prices throughout 2021 as the cost of materials, land and labor continue to rise.” Of the 3 components, current sales conditions were unchanged at 88. Sales expectations in the next 6 months rose 1 point to 81 & buyer traffic fell 1 point to 73.
Homebuilder confidence is high, but rising costs of materials pose major risks
Atlanta Federal Reserve Pres Raphael Bostic said that he’s comfortable with the central bank's ultra-loose policy even as inflation gains steam in the US economy. “We are still 8 million jobs short of where we were pre-pandemic,” Bostic said. “Until we make substantial progress to close that gap, I think we’ve got to have our policies in a very strongly accommodative situation or stance.” Currently, the Fed is keeping short-term benchmark borrowing rates anchored near zero & is buying at least $120B of bonds each month. That has come even as the Consumer Price Index lurched up 4.2% in Apr, well above expectations, and as Bostic's own Atlanta Fed GDPNow tracker is putting 2nd-qtr growth at 10.5%. However, Apr's disappointing jobs report, with nonfarm payrolls growing just 266K against projections for 1M, has Fed policymakers likely on hold, where Bostic said he will be until he sees a broader economic recovery. “I’m a nervous guy. I’m always thinking about scenarios. Are we staying in our position for too long? But I’m not seeing that right now, and I’m not really thinking that we need to act,” he added. “So, I’m going to keep my eyes open and I’m definitely going to pay close attention. But now is not the time where we have to consider moving.”
Fed’s Bostic says there’s no reason to change policy despite inflation fears
Dr Scott Gottlieb said he expects more Americans to stop wearing face coverings to protect against the coronavirus in the coming weeks. “By June, nobody is going to be wearing masks. By June, I think, the prevalence [of Covid] is going to be sufficiently low in this country [and[ we’re just not going to be concerned about it,” the former Food & Drug Administration commissioner said. His comments came during a back-&-forth about how the updated mask guidance from the Centers for Disease Control & Prevention (CDC) impacts young children who are not yet eligible to receive the Covid vaccine. Kids aged 12-15 became eligible for the vaccine last week. While he's fully vaccinated, Gottlieb said he wore a mask this weekend while shopping with his young children & no longer feels at risk of getting Covid, but has no problem wearing a mask for the time being when he's with them. “What’s the downside of keeping it on?” Gottlieb said. “I would probably keep a mask on my kids a little bit longer. Another week or two,” added Gottlieb. Thurs, the CDC said in most indoor & outdoor settings, fully vaccinated people no longer need to wear a face covering or maintain 6 feet of social distance from others. Masks are still needed on airplanes & public transportation, according to a federal rule.
Dr. Scott Gottlieb says ‘nobody is going to be wearing’ Covid masks by June
It's hard for investors to shake inflation fears. In addition, all the controversy about wearing or not wearing masks casts doubts about the strength of the economic recovery. Gold has seen strong demand in the last couple of months.
Dow Jones Industrials
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