Markets edge higher ahead of retailers' earnings reports

Dow went up 151 (close to session highs), advancers slightly ahead of decliners & NAZ gained 80.  The MLP index fell 1+ to the 213s & the REIT index rose 1+ to the 453s.  Junk bond funds were mixed & Treasuries continued in demand by investors.  Oil declined 2+ to the 89s & gold dropped 17 to 1793 (more on both below).

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In Jun, the Treasury Dept banned US investors from buying any Russian security as part of economic sanctions levied against Moscow for its war on Ukraine.  This ban prompted most US & European banks to pull back from the market.  After the Treasury released guidelines in Jul allowing US holders to wind down their positions, the largest financial banks have returned to the market for Russian gov & corp bonds.  Around $40B of Russian sovereign bonds were outstanding prior to Russia's invasion of Ukraine in late Feb, roughly ½ of which was held by foreign funds.  A number of investors were stuck with Russian assets, as their value took a nose dive, buyers disappeared & sanctions increased the difficulty of trading.  Some US lawmakers asked big banks in May for information about trades in Russian debt, arguing that they could undermine sanctions.  And in Jun, the Treasury Dept's Office of Foreign Assets Control prohibited US money managers from purchasing any Russian debt or stocks in secondary markets, leading firms to pull back.  The Treasury Dept offered additional guidance in Jul to help settle default insurance payments on Russian bonds.  The dept also explained that banks could facilitate, clear & settle transactions of Russian securities if it helped US holders wind down their positions.  Meanwhile, European regulators have also scaled back restrictions to allow investors to put Russian assets into side pockets, although this is permitted on a case-by-case basis.  Some firms have offered to trade Russian sovereign & corp bonds, & some have proposed facilitating trades in bonds denominated in both rubles & $s.  However, they are also insisting on additional paperwork from clients & are opposed to taking on any risk.

Wall Street returns to Russian bond trading months after Moscow sanctions

Competition for homes across the nation is easing to levels not seen since the early days of the coronavirus pandemic, according to Redfin.  In Jul, 44.3% of home offers from Redfin agents faced competition nationwide, down from 50.9% in Jun & 63.8% last Jul.  The typical home last month saw 3.5 offers – down from 4.1 offers in Jun & 5.3 offers last Jul.  Jul marked the 6th consecutive month that bidding wars eased. It also had the lowest share of home offers facing competition on record except for Apr 2020, "when the onset of the coronavirus brought the housing market to a near standstill," Redfin reported.  An increasing number of potential buyers are getting priced out of the market due to uncomfortably high inflation & mortgage rates.  According to mortgage buyer Freddie Mac, the 30-year fixed mortgage rate averaged 5.22% currently . That's up from last week when it averaged 4.99%.  A year ago, the fixed 30-year mortgage rate averaged 2.87%.  Properties are sitting on the market longer & the housing shortage is easing, which is offering buyers who haven't backed out of the market more options & room to negotiate.  As a result, sellers are dropping their asking prices.  Each week, about 8% of listings on the market have dropped in asking price, which is the highest share on record.  As a result, sellers are dropping their asking prices.  Each week, about 8% of listings on the market have dropped in asking price, which is the highest share on record.  

Homebuying competition falls to lowest level in 2 years

US freight rates increased 28% year over year, but declined almost 2% month over month in Jul, a likely signal that the US market has reached peak freight rates, according to the Jul Cass Freight report, just as peak shipping season encompassing both back-to-school & the holidays begins.  “We’re coming into this peak season with much more free capacity. I think that’s going to be a good thing from a cost perspective for those big retailers who have been struggling with a lot of cost inflation,” Cass Index Report Author & ACT Research Sr Analyst Tim Denoyer said.  The report comes as major retailers are set to report earnings this week.  The Cass Freight report also follows a better-than-expected inflation reports last week that signal a potential slowdown in inflation.  Shipments, freight moved by companies, increased by 0.4% year over year, according to the report, but declined nearly 2% month over month.  “The market balance has really shifted. It’s steady on the demand perspective, but supply has grown,” Denoyer added.  Even with shipment trends flattening, demand remains elevated over pre-pandemic levels & US logistics companies, especially trucking companies, should continue to see strong pricing power.  The Covid crisis led many independent truckers to leave the industry & in 2021, the American Trucking Association released a report finding the nation's trucker shortage reached a record 80K.  That report also found 1M new truckers would be needed over the next decade to maintain current levels.

U.S. freight rates have likely peaked, another signal inflation is easing

Gold futures dipped below $1800 an ounce, to settle below that key level for the first time in more than a week amid a broader pullback in commodity prices as the $ advanced and traders grappled with a decidedly "risk off" mood in markets.  Dec gold futures fell by $17 (1%) an ounce to $1793.  Prices for the most-active contract settled at their lowest since Aug 5.  With equity futures pulling back & Treasury yields falling, markets appeared to be shifting back into "risk off" mode today following a torrid 4-week rally for the stock market.  Some analysts blamed the sour mood on weak economic data out of China, along with surprise interest-rate cuts from the country's central bank.

Gold drops below $1,800, settles at lowest level in more than a week as dollar rebound

Oil futures settled with a loss of nearly 3% as weak economic data from China raise fears that a slowing global economy will reduce demand for energy products.  West Texas Intermediate crude for Sep fell $2.68 (2.9%) to close at $89.41 a barrel, leaving the US benchmark.

Oil settles with a 3% loss as China growth worries dominate

The Dow has risen a staggering 3.3K in the last months with hardly a pause (see below), based on expectations for inflation will ease very quickly & no recession.  That's a lot to ask.  The massive gov spending bill just passed has more more high inflation written all over it while recession hops are still iffy.  Retailers' earnings reports will start tomorrow.

Dow Jones Industrials