Dow slid back 13, advancers over decliners about 2-1 & NAZ went up 37. The MLP index added 1+ to 201 & the REIT index was fractionally lower to 451. Junk bond funds crawled higher & Treasuries saw limited selling. Oil climbed 1 to the high 73s & gold jumped 15 to 1792.
AMJ (Alerian MLP index tracking fund)
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Federal Reserve Chair Jerome Powell said the central bank will not raise interest rates from
rock-bottom levels too quickly due to recent inflation fears,
reiterating policymakers' commitment to a "broad and inclusive"
job-market recovery. "We
will not raise interest rates preemptively because we think employment
is too high, because we fear the possible onset of inflation," Powell
told lawmakers while testifying before the House Select Subcommittee on
the Coronavirus Crisis. "Instead, we will wait for evidence of actual
inflation or other imbalances." Powell has repeatedly stressed
that a recent inflation spike – consumer prices jumped 5% in May
compared with a year earlier, the largest increase in 13 years – is
temporary, reflecting supply bottlenecks & distorted data due to a
dramatic drop in prices last year. Most of the price gains have occurred
in places like used cars, airplane tickets & hotel rooms, Powell
noted, as pent-up Americans look to resume normal pre-crisis
activities. "The incoming data are very much consistent with the
view that these are factors that will wane over time and then inflation
will then move down toward our goals," he added. The Fed head stressed that officials look at a broad set of labor market
statistics before adjusting monetary policy & are focused on ensuring
the economy reaches full employment, taking into account "all kinds of
measures of unemployment, including unemployment and employment for
various groups, ethnic groups, gender groups, things like that."
Powell says Fed will wait for 'actual inflation' before raising interest rates
Iranian oil, currently under sanctions by the US & other global
powers, is less likely to return to the market freely anytime soon which
is going to raise global prices & hit us all in the wallet. Already West Texas Intermediate crude topped $73 per barrel, while Brent, the global benchmark sits at $75. On the nuclear front, the EU, Russia, China & Germany
all rushed to try to get a deal done ahead of the Iranian election but
failed. They knew they had a deadline as Raisi was handpicked by
Ayatollah Khamenei to win. If Biden thought that Vladimir Putin was a murderer, Raisi no doubt
will give Putin a run for his money. The US has imposed a sanction
against Raisi because of his involvement in the torture & mass murder
of thousands of political dissidents in 1988 in a purge that was
unprecedented in modern Iranian history. Raisi is sounding very much in
charge in his first press conference, when asked about his role in the
murders he quipped that he "was a defender of human rights." The
Iranian pres-elect also had some choice words about the Iranian
nuclear accord saying it was up to the US to return to the nuclear
deal in full compliance. He said the EU failed to meet its obligation
under the Joint Comprehensive Plan of Action (JCPOA) nuclear deal. He
also dismissed America's desire to talk about missile production that
was a glaring omission from the 2015 accord. Iran’s Raisi represents what's worst about the Iranian regime. His
ascent to power is a sign that Iran is moving further away from
intl norms & instead is going to adopt a more aggressive
approach in global affairs.
Iranian election throws oil, nuclear deal into abyss
Mortgage rates rose last week, along with demand for refinances. That may sound counterintuitive, but it speaks to the larger picture of where mortgage rates are heading. Applications to refinance a home loan rose 3% last week from the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. Volume was 9% lower than a year earlier. The data comes as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548K or less) rose to the highest level in a month. It increased to 3.18% from 3.11%, with points increasing to 0.48 from 0.36 (including the origination fee) for loans with a 20% down payment. The rate was just 12 basis points higher a year ago. Rates jumped after Federal Reserve officials indicated last week that rate hikes could come in 2023, a year earlier than expected. However, they didn't mention when they would start scaling back their massive bond-buying program, which has kept mortgage rates near record lows. Refinance demand had been falling sharply as rates rise but has improved in recent weeks. This may be because homeowners think rates are only going up, & it could be the last chance for the best deal. Rates set more than a dozen record lows last year & refinance demand was huge. However, thousands of borrowers can still save now before rates move higher. Mortgage applications to purchase a home increased 1% from the previous week & were 14% lower than a year ago. Buyers are hitting an affordability wall, as home prices keep rising quickly. A report on existing home sales in May showed the 4th straight month of declining home sales. “Falling affordability is simply squeezing some first-time buyers out of the market.,” said Lawrence Yun, chief economist for the National Association of Realtors.
Weekly mortgage refinance demand jumps as some fear end of super-low rates is near
Amazon's Prime Day powered the biggest day for online internet. That helped NAZ with its tech stocks but the broader market did not attract a lot of buyers. An unsettled oil market, the threat of the new virus disturbing the recovery & signals of higher interest rates coming are making investors cautious. In Jun, the Dow is down about 2% (shown below).
Dow Jones Industrials
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