Dow dropped 253, decliners over advancers 3-2 & NAZ was off 40. The MLP index added 2 to the 205s & the REIT index fell 4 to the 463s. Junk bond funds slid lower & Treasuries saw a little more buying, raising yields. Oil shot up 5+ to the 114s & gold rose 10 to 1931.
AMJ (Alerian MLP index tracking fund)
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NATO Secretary-General Jens Stoltenberg said the alliance is likely to bolster troops along its eastern flank, deploying 4 new battle groups in Bulgaria, Hungary, Romania & Slovakia. “I expect leaders will agree to strengthen NATO’s posture in all domains, with major increases in the eastern part of the alliance on land, in the air and at sea,” Stoltenberg said. Since the Kremlin's Feb 24 invasion of Ukraine, NATO has readied 140K troops in the region & mobilized a colossal war chest of advanced military equipment. Of the approximately 140K troops, the US has provided the lion's share with 100K soldiers. The US service members & NATO troops are currently deployed in neighboring NATO-member countries & are not directly fighting with Russian forces inside Ukraine. The alliance, which has more than 140 warships at the ready as well as 130 aircraft on heightened alert, has previously warned Putin that an attack on a NATO member state will be viewed as an attack on all, triggering the group’s cornerstone Article 5 that calls for a military response from member nations. Ukraine, which has sought NATO membership since 2002, is bordered by 4 NATO allies; Poland, Slovakia, Hungary & Romania. Poland currently hosts the majority of the troops from the 30-member alliance & has thus far taken the lion's share of refugees fleeing Putin's war.
NATO to bolster troop presence in Bulgaria, Hungary, Romania and Slovakia
A sharp increase in mortgage interest rates is taking its toll on loan demand, especially refinances. Total mortgage application volume fell 8.1% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647K less) increased to 4.50% from 4.27%, with points rising to 0.59 from 0.54 (including the origination fee) for loans with a 20% down payment. “The jump in rates comes as markets moved to price in a much faster pace of rate hikes, as well as expectations of fewer MBS purchases from the Federal Reserve,” said Mike Fratantoni, the MBA's chief economist. “MBA’s new March forecast expects mortgage rates to continue to trend higher through the course of 2022.” As a result, applications to refinance a home loan, which are highly sensitive to weekly rate moves, fell 14% from the previous week & were 54% lower than the same week one year ago. The refinance share of mortgage activity decreased to 44.8% of total applications from 48.4% the previous week. Mortgage applications to purchase a home, which are less sensitive to weekly rate moves, fell 2% for the week & were 12% lower than the same week one year ago. Economists are starting to revise their home sales forecasts lower, due to rising rates. The housing market is already expensive, as a supply-demand imbalance puts upward pressure on prices. Rising rates are weakening affordability even further. While overall purchase application volume was down slightly, there was a larger drop in FHA & VA loan demand. These loans are popular with lower-income homebuyers.
Mortgage refinance demand plunges 14%, as interest rates spike higher
A bipartisan group of senators is working with the Treasury Dept to prevent Russia from liquidating its giant stash of gold, potentially blocking one of the Kremlin's last methods for circumventing punishing financial sanctions. Treasury Secretary Janet Yellen will meet this week with senators to discuss the legislation that would target Russia's ability to sell gold reserves. "Secretary Yellen regularly meets with members of Congress to discuss legislation," a spokesperson said. "Additionally, Treasury staff frequently provide technical assistance on sanctions bills." The legislation under consideration would impose secondary sanctions on any American entities knowingly buying or selling Russian gold. Russia’s gold stockpile was estimated to be worth $132B as of the end of Jan – the world's 5th-biggest stockpile. If the US moves to crack down on gold transactions, it could deter banks in places like China or India from buying or lending against Russia's reserves. The senators have suggested the bill could pass as soon as this week. Lawmakers originally wanted to include it as part of a must-pass omnibus spending bill. "By sanctioning these reserves, we can further isolate Russia from the world’s economy and increase the difficulty of Putin’s increasingly-costly military campaign," senator Angus King said.
Lawmakers, Yellen mull freezing Russian gold reserves
After the Dow's recent rise (see below), traders are pausing today to take some profits. The only significant new news during this rally has come from the Fed which promised to fight inflation. That's hardly a surprise. The war in Ukraine drones on, interest rates keep rising & inflation is hurting just about all consumers. Demand for safe haven gold continues to rise.
Dow Jones Industrials
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