Dow soared 617, advancers over decliners 6-1 & NAZ advanced 221. The MLP index went up 4+ to the 187s & the REIT index gained 5+ to the 412s. Junk bond funds rose along with the stock market & Treasuries were sold while stocks rose. Oil recovered 3+ to the 108s & gold was even at 1830.
AMJ (Alerian MLP index tracking fund)
A widely followed consumer sentiment survey showed inflation expectations have eased slightly. The University of Michigan’s Surveys of Consumers said consumers expect inflation to rise at a 5.3% annualized rate as of the end of Jun. That's down from a preliminary reading released earlier this month, which showed inflation was expected by consumers to increase at a 5.4% clip. Still, Surveys of Consumers director Joanne Hsu said consumers “also expressed the highest level of uncertainty over long-run inflation since 1991, continuing a sharp increase that began in 2021.” Federal Reserve Chair Jerome Powell said earlier this month an uptick in consumer inflation expectations helped sway the central bank to raise rates by 75 basis points, or 0.75 percentage point. That's a bigger rate hike than many anticipated heading into the announcement. Meanwhile, overall consumer sentiment fell to a record low, hitting 50. That’s 14.4% below a May reading of 58.4 & 41.5% from a year-earlier period. “Consumers across income, age, education, geographic region, political affiliation, stockholding and homeownership status all posted large declines,” Hsu added. “About 79% of consumers expected bad times in the year ahead for business conditions, the highest since 2009. Inflation continued to be of paramount concern to consumers; 47% of consumers blamed inflation for eroding their living standards, just one point shy of the all-time high last reached during the Great Recession,” Hsu continued.
Consumer sentiment survey followed by the Fed shows inflation expectations ease slightly
Homebuyers feeling squeezed in the current real estate market are in for more pain as the Federal Reserve's efforts to tame scorching-hot inflation are pushing mortgage rates toward 6%. According to Freddie Mac, the average rate on a 30-year fixed mortgage is 5.81%, the highest level since 2008 & up 3.02% from a year ago. Last week, the average 30-year fixed-rate mortgage hit 5.78%, the largest weekly increase since 1987. Meanwhile, the average rates for a 15-year fixed-rate mortgage & 5-year Treasury-indexed hybrid adjustable-rate mortgage are now 4.92% & 4.4%, respectively. The Mortgage Bankers Association reported that the national median mortgage payment was $1897 in May, up from $1889 in Apr & $1736 in Mar. Payments have increased $513 (37.1%) in the first 5 months of the year. The latest data comes as existing home sales fell to a seasonally adjusted annual rate of 5.41M in May, down 3.4% from the previous month. On a year-over-year basis, existing home sales receded 8.6%. The median existing home price for all housing types in May was $407K, up 14.8% from May 2021, as prices increased in all regions. "Fixed mortgage rates have increased by more than two full percentage points since the beginning of the year," Freddie Mac Chief Economist Sam Khater said. "The combination of rising rates and high home prices is the likely driver of recent declines in existing home sales. However, in reality, many potential homebuyers are still interested in purchasing a home, keeping the market competitive but leveling off the last two years of red-hot activity."
Mortgage rates hit highest level not seen since 2008
Treasury yields were mostly higher, as market participants assessed the prospect of major central banks implementing further interest rate hikes to curb soaring inflation. The yield on the benchmark 10-year Treasury note was slightly higher at 3.093%, while the yield on the 30-year Treasury bond rose around 3 basis point to 3.212%. Yields move inversely to prices. A final reading of consumer sentiment for Jun showed a slight easing of inflation expectations to 5.3% over the next year. The preliminary reading earlier this month showed an expected 5.4% rise in prices. Federal Reserve Chair Jerome Powell has pointed to preliminary reading as a reason the Fed implemented its biggest rate hike since 1994 on Jun 15. Yields trimmed their gains after the reading was released. Powell yesterday reaffirmed the central bank's “unconditional” commitment to reining in 40-year high inflation levels. Speaking at the House of Representatives Financial Services Committee, Powell acknowledged that sharply higher interest rates could push up unemployment but said that restoring price stability was “something that we need to do.” The Fed increased its benchmark funds rate by 75 basis points last week — its largest rate increase since 1994. The Swiss National Bank also surprised markets in recent days with its first rate hike since 2007, while the Bank of England implemented its 5th rate rise in a row.
10-year Treasury yield ticks higher but still down for the week as investors weigh slowing economy
Dow Jones Industrials
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