Dow was off 140, advancers slightly ahead of decliners but NAZ gained 80. The MLP index declined 2+ to 196 & the REIT index remains in the 468s. Junk bond funds were being purchased & Treasuries saw more buying which lowers yields. Oil went up in the 103s & gold fell 7 to 1935.
AMJ (Alerian MLP index tracking fund)
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Pres Biden & China's Pres Xi Jinping will speak by phone today, as the 2 leaders weigh the others' posture on a range of economic & security tensions that have been heightened following Russia's invasion of Ukraine. While the US & China are adversaries, Americans' appetite for low-cost Chinese goods & China's dependence on US buyers means the 2 countries are intertwined whether they like it or not. Despite any political rhetoric, disrupting trade relations between the 2 nations would damage the economies of both. China's cozy relationship with Russia has made the situation even more delicate. The Biden administration is watching to see whether – or to what extent – China assists Russia in working around the crippling sanctions imposed by the US & its NATO allies. Since Vladimir Putin's assault on Ukraine, the Chinese gov has moved forward with agreements to buy more oil & wheat from Russia in deals solidified in early Feb, ahead of the invasion. But Beijing denies more recent allegations that it has agreed to send military equipment or economic aid to the Kremlin. China has not condemned Russia's actions against Ukraine & refuses to refer to the ongoing invasion as a "war," though a Chinese official praised the Ukrainian people on Wed. Beijing has strong trade relationships with both countries & insists it is "impartial" regarding the conflict.
Biden to phone China as economic tensions, security threats escalate
St Louis Fed Pres James Bullard said he thinks the central bank should raise interest rates the equivalent of 12 times this year to convince the public it is serious about fighting inflation. As the lone dissenter at this week's Federal Reserve meeting, Bullard said, & added that he would like to see the central bank's benchmark interest rate boosted above 3% from the near-0% level where it had stood. “This would quickly adjust the policy rate to a more appropriate level for the current circumstances,” he continued. Following its meeting, the FOMC said it would raise overnight rates for banks by 0.25 percentage point, historically the typical increment with which the FOMC moves. Accompanying economic projections indicated a path this year that would see the equivalent of seven rate hikes, or 1.75 percentage points. The move was the first time the Fed has raised the rate since 2018 & came in response to a stunning increase in inflation that has seen prices rise at their fastest pace in 40 years. Bullard was the only FOMC member to vote against the move, stating he would have preferred a rate hike of 0.5 percentage point (50 basis points). He added the Fed also should have started the process of reducing the nearly $9T in bond holdings it has accumulated over the past 14 years. Bullard said inflation is hurting people the Fed is trying to help the most, namely those on the lower rungs of the economic ladder. “The burden of excessive inflation is particularly heavy for people with modest incomes and wealth and for those with limited ability to adjust to a rising cost of living,” he added. “The combination of strong real economic performance and unexpectedly high inflation means that the Committee’s policy rate is currently far too low to prudently manage the U.S. macroeconomic situation.” Fed officials overall were divided on how to proceed with rates this year.
St. Louis Fed's Bullard says central bank should raise rates above 3% this year
Sales of previously owned homes fell 7.2% month to month in Feb to a seasonally adjusted annualized rate of 6.02 million units, according to the National Association of Realtors. That significantly missed expectations of 6.13M units. Sales were 2.4% lower compared with the same month a year ago. Rising mortgage rates likely played a role in the underwhelming numbers. The sales count is based on closings, which means the homes likely went under sale contract in Dec & Jan. This is important to note, as mortgage rates were relatively low in Dec, with the average rate on the popular 30-year fixed loan hovering around 3.25%, according to Mortgage News Daily. But that rate then began to rise steadily in Jan, reaching 3.68% by the end of the month. The rate is now considerably higher at 4.5%. “It will be very interesting to observe what’s going to happen in the coming months as mortgage rates make a much more meaningful jump,” said Lawrence Yun, chief economist for the Realtors. While some of the sales figures were likely affected by rising rates, the bigger issue in housing today is very low supply. More homes came on the market in Feb compared with Jan, but there were just 870K homes for sale at the end of the month, a 15.5% drop year over year. At the current sales pace, that represents a 1.7-month supply, which is close to an all-time low. Tight supply & strong demand continued to push prices higher. The median price for an existing home sold in Feb was $357K, an increase of 15% from a year ago. That price is skewed somewhat by the mix of homes that are currently for sale & the price range where sales are most prevalent. Supply is leanest on the lower end of the market. Sales of homes priced $100-250K fell 26% year over year. Sales of homes priced $750K-$1M increased 24%. Sales of homes priced above $1M jumped 21%.
Home sales fell far more than expected in February, as mortgage rates rose and supply remained tight
Bargain hunting is over as investors weigh the Fed's recent move along with the war, high inflation, rising interest rates & a slowdown in the economic recovery. Currently the Dow is up about 450 this week. While it may be the best weekly advance this year, it's not ranked as impressive.
Dow Jones Industrials
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