Dow declined 164 finished near the lows, decliners over advancers better than 2-1 & NAZ pulled back 262. The MLP index was off 1 to the 191s & the REIT index fell 1+ to the 408s. Junk bond funds drifted lower & Treasuries continued in strong demand bringing lower yields. Oil finished fractionally.lower in the 104s & gold dropped 9 to 1732, a 9 month low (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Consumer expectations for where inflation will be one year from now
climbed to another record high in Jun, according to a key Federal
Reserve Bank of New York survey, a worrisome sign for
the central bank as it tries to cool surging prices. The median expectation is that the inflation rate
will be up 6.8% one year from now, toppling the previous high of 6.6%
recorded in Mar, according to the New York Federal Reserve's' Survey of
Consumer Expectations. The outlook for price gains is the highest since
the survey's inception in 2013. Despite that, 3 years from now,
consumers see inflation cooling off slightly to 3.6% – down from the
3.9% recorded last month. "Median inflation uncertainty—or the
uncertainty expressed regarding future inflation outcomes—increased at
the one-year ahead horizon to a new series high, but remained unchanged
at the three-year ahead horizon. Uncertainty at the five-year ahead
horizon increased," the survey reported. With consumers lifting their
expectations for inflation over the next year, they believe that things
like gasoline, medical care, rent & tuition will also increase over
the next 12 months. However, they expect that food prices will moderate
in coming months. The report is based on a rotating panel of 1300 households. The survey plays a critical role in determining how Fed policymakers respond to the inflation
crisis. That is because actual inflation depends, at least in part, on
what consumers think it will be. It is sort of a self-fulfilling
prophecy – if everyone expects prices to rise by 3% in the year, that
signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
Consumers brace for sky-high inflation in worrying sign for Fed
Americans are canceling deals to buy homes at the highest rate since the start of the Covid pandemic. The share of sale agreements on existing homes canceled in Jun was just under 15% of all homes that went under contract, according to a new report from Redfin. That is the highest share since early 2020, when homebuying paused immediately, albeit briefly. Cancelations were at about 11% one year ago. Higher mortgage rates & surging inflation are causing many potential homebuyers to reconsider their purchases. The average rate on the 30-year fixed mortgage started this year around 3% & then began rising steadily. It briefly shot above 6% in mid-Jun before settling in a narrow range around 5.75% now, according to Mortgage News Daily. Higher mortgage rates have also caused some borrowers to no longer qualify for the loans they want. Lenders generally use a debt-to-income ratio of about 28% as the ceiling for home loans. The costs of owning a median-priced home in Q2 required 31.5% of the average US wage, according to a report by Attom, a property data provider. That's the highest percentage since 2007 & up from 24% the year before, marking the biggest jump in more than 2 decades. Buyers are also seeing the once red-hot market turn around quickly & dramatically. They may no longer see the urgency in bidding for a home that they feel might depreciate in the coming year. Homebuilders are also seeing higher cancellation rates. Even before the sharpest increase in rates in Jun, cancelations in May jumped to 9.3% in a survey of builders by John Burns Real Estate Consulting. That compares with 6.6% in May 2021.
Homebuyers are canceling deals at the highest rate since the beginning of the pandemic
Inflation is a real worry for many Americans — even those who earn 6 figures — and it's impacting decisions about how they spend their money. Fully 96% of those high earners are concerned about inflation & 65% are “very concerned,” according to a Morning Consult/CNBC poll, which last week surveyed 1000 US adults with an income of at least $100K a year. Some 34% said they are worse off financially this year than a year ago & 46% have had to cut household spending due to inflation, the survey found. If inflation gets worse, 38% plan to cut spending. Consumers have been paying higher prices on everything, including gas, food & shelter, over the past year, & it is costing households hundreds of $s more a month. In May, the Consumer Price Index, which measures prices on consumer goods, jumped 8.6% year over year — the highest increase since 1981.
65% of Americans earning $100,000 or more are ‘very concerned’ about inflation, new CNBC poll finds
Gold prices fell to mark their lowest settlement in more than 9 months, after clinching a 4th consecutive weekly decline as the strong $ continued to weigh on the yellow metal. Futures prices for gold had settled higher on Thurs & Fri following a 7-session losing streak that ended Wed, when prices for the most-active contract also marked their lowest finish last Sep. Gold futures for Aug fell $10 (0.6%) to settle at $1731 per ounce, the lowest finish for a most-active contract since Sep 29, 2021. Most of gold's losses since it reached its 2022 peak north of $2K per ounce has been the result of the strengthening $ & Treasury yields, which have made the shiny metal less attractive to investors by comparison. Treasury yields have picked up over the past few days, after coming off their highs of the year reached in mid-Jun. Meanwhile, thanks largely to weakness in the €, the ICE US Dollar, a measure of the $'s strength against a basket of rival currencies, has reached a new 20-year high around 108. Traders eagerly await US economic data this week, with the consumer-price index data due Wed & producer-price index out Thurs.
Gold prices settle at their lowest since September
Natural-gas futures climbed by more than 6%, buoyed by the planned shutdown of a key European pipeline, while oil prices finished with a loss, pressured by worries about a slowdown in energy demand tied to global inflation & lockdowns in China. Russia has shut down the Nord Stream 1 pipeline for scheduled maintenance work until Jul 21, raising concern that gas deliveries thru the vital European pipeline may not be turned back on again. Aug natural gas rose 39¢ (6.5%) to settle at $6.426 per M British thermal units. Aug West Texas Intermediate crude lost 70¢ (0.7%) to finish at $104.09 a barrel.
Natural-gas futures end more than 6% higher; oil settles with a loss
Investor sentiment was negative all day. The Dow had a brief rally at midday, but sellers returned & dragged it back into the red. Thoughts of high inflation & a recession around the corner are not going away. Investors remain nervous. Look at the dreary chart below.
Dow Jones Industrials
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