Dow gained 178, advancers over decliners a very big 4-1 & NAZ went up 132. The MLP index jumped 5+ to the 198s & the REIT index added 1 to the 408s. Junk bond funds crawled higher & Treasuries were sold, raising yields (more below). Oil rose up 3+ to the 101s & gold gained 10 to 1713.
AMJ (Alerian MLP index tracking fund)
Confidence among builders in the nation's single-family housing market fell in Jul to the lowest level since the start of the pandemic. The National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI), a survey designed to gauge market conditions, found builder sentiment dropped 12 points to 55. That marked the largest single-month drop in the survey’s 37-year history with the exception of Apr in 2020, when the reading plummeted 42 points to 30 after the start of the Covid-19 pandemic. Any rating above 50 on the index is still considered positive, but sentiment has now fallen 24 points since Mar, when mortgage rates began moving higher. The average rate on the 30-year fixed mortgage has nearly doubled since Jan & is now hovering just below 6%. Sentiment stood at 80 in Jul of last year after hitting a record high of 90 in Nov 2020, when the pandemic sparked a rash of homebuying among people looking for more space in less urban areas. Now, concerns about inflation & recession are among the factors taking a toll on builder sentiment. Of the index's 3 components, builder sentiment about current sales conditions dropped 12 points to 64, while sales expectations for the next 6 months fell 11 points to 50 & sentiment about buyer traffic declined 11 points to 37. That last component is now solidly in negative territory. “Affordability is the greatest challenge facing the housing market,” said Robert Dietz, NAHB's chief economist. “Significant segments of the home buying population are priced out of the market.” Some major publicly traded homebuilders addressed affordability in their latest earnings releases, saying they would work with buyers to accommodate tightening budgets. But the price of a newly built home in May was $449K, up 15% jump from a year ago. That may change in the coming months. In another sign of a softening market, 13% of builders in the HMI survey reported reducing home prices in the past month to bolster sales or limit cancellations, according to Jerry Konter, NAHB chair. “Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” Konter added.
Homebuilder sentiment takes historic plunge in July as buyers pull back
Treasury yields were slightly higher, but a key yield curve remained inverted, with investors assessing the Federal Reserve’s likely policy move next week. The yield on the benchmark 10-year Treasury note climbed to 2.954% while the yield on the 30-year Treasury bond was up at 3.114%. Yields move inversely to prices. The gap between the 2-year & 10-year yields remained inverted as the market weighs the possibility that the Fed will hike interest rates by 75 basis points at its meeting on Jul 26 & 27, rather than the more aggressive option of 100 basis points. The 2-year yield was last seen at 3.156%. Yield-curve inversions — when shorter-term gov bonds have higher yields than longer-term ones despite carrying lower risk — are often viewed by markets as signs that a recession is imminent. A growing number of analysts have been suggesting that a 100-basis-point hike to interest rates could be on the table after inflation continued to rise more than expected. Fed Governor Christopher Waller said Thurs that he supports a 75 basis point hike but will be watching incoming data & could back a larger move if necessary.
Treasury yields rise as curve remains inverted, with investors watching the Fed
Bank of America (BAC) Q2 results benefited from rising interest rates,
but profit took a hit from about $425M in expenses tied to
regulatory matters. EPS dropped 32% to 73¢ from a year
earlier as the firm took a $523M provision for credit losses. A
year ago, the bank had a $1.6B benefit as borrowers panroved more
creditworthy than expected. Excluding the impact of the regulatory expenses, EPS was 78¢, which was higher predicted. Revenue
climbed 5.6% to $22.8B, edging out expectations, as
net interest income surged 22% to $12.4B on rising interest rates & loan growth. That figure could climb by $900M or $1B
in Q3 & by at least that much in Q4,
CFO Alastair Borthwick said. BAC cited “mark-to-market losses related to leveraged
finance positions” but didn't immediately disclose a figure for the
losses. Last month, Borthwick said that the bank will likely post a $150M writedown on its buyout loans. The stock went up 26¢.
If you would like to learn more about BAC, click on this link:
club.ino.com/trend/analysis/stock/BAC?a_aid=CD3289&a_bid=6ae5b6f7
Bank of America revenue tops expectations as lender benefits from higher interest rates
Dow Jones Industrials
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