Dow dropped 173 (near session lows again), decliners over advancers 5-2 & NAZ pulled back 167. The MLP index was off 2+ to the 221s & the REIT index fell another 7+ to 401 on worries about higher interest rates. Junk bond funds drifted lower & Treasuries saw more selling, driving higher yields. Oil tumbled 3+ to the low 85s & gold sank 36 to 1672 (more on both below).
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Spending at retail stores inched higher in Aug as the price of
gasoline fell, but demand remained muted as consumers continue to
confront scorching-hot inflation. Retail sails a measure of how much consumers spent on a number of everyday goods,
including cars, food & gasoline, rose 0.3% in Aug, the Commerce
Dept reported. The forecast expected
sales to be unchanged. That is an improvement from the downwardly revised data in Jul, which showed that retail sales actually tumbled 0.4%. The
Aug advance is not adjusted for inflation – which rose 0.1% last
month – meaning that consumers may be spending the same but getting less
bang for their buck. When excluding spending on autos, sales also actually fell 0.3% in Aug. Excluding autos & gas, sales rose 0.3%. Sales
at motor vehicle & parts dealers led all categories, jumping 2.8%
last month, helping to offset a 4.2% decline in gasoline sales. Meanwhile, sales at bars & restaurants rose 1.1% in Aug, even as the price of food accelerated. The data comes as consumers face the worst inflation spike in a
generation: The gov reported earlier this week that the consumer
price index – which measures a basket of everyday goods including rent,
food & health care – climbed 0.1% in Aug on a monthly basis and
8.3% from the previous year, higher than expected.
Retail sales unexpectedly edge higher despite soaring inflation
The average rate for a 30-year fixed mortgage topped 6% this week, the highest level since 2008 & more than twice what it was a year ago. Freddie Mac said that its latest Primary Mortgage Market Survey shows the average rate for the benchmark 30-year fixed mortgage rose again this week to 6.02%%, up from last week's reading of 5.89%. At this time last year, 30-year fixed-rate products averaged 2.86%. The rate for a 15-year fixed note also rose, averaging 5.21% after coming in at 5.16% last week. That is also more than double the average rate at this time last year when 15-year products were at 2.12%. "Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008," said Sam Khater, Freddie Mac's chief economist. "Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large."
Mortgage rates climb above 6%, first time since 2008
Russian forces have targeted a dam on the Inhulets River near Kryvyi Rih — Pres Volodymyr Zelenskyy's home city — with 8 cruise missiles, according to Ukrainian officials, leading to flooding in parts of the city and residents being evacuated. Oleksandr Vilkul, the head of the Kryvyi Rih military administration, said that Russian missiles had hit a “very large hydrotechnical structure,” widely reported as a dam near the city. Rising water levels on the river led a city official to ask residents to leave parts of the city. In addition, Zelenskyy was involved in a car accident, the pres's office said, but was unhurt in the incident that took place in Kyiv. A Presidential Press Secretary said last night that “a car collided with the car of the President of Ukraine and escort vehicles” & that law enforcement officers would “find out all the circumstances of the accident.” Earlier, he said the country's armed forces were moving forward “towards victory” as he praised the return of the Ukrainian flag to recaptured territory. The Ukrainian military is continuing its major counteroffensive advance on the Russian occupied city of Kherson in Southern Ukraine, a spokesman for the Ukrainian military reported. Vladyslav Nazarov, of the Southern Operation Command, said artillery units of the Ukrainian Defense Forces executed over 140 fire missions in the past day alone. Facing Russian soldiers in the south who are better prepared to defend their positions than the Russians in retaken areas of the northeast were, Ukrainians have focused on isolating Russian units by bombing bridges & roads that the Kremlin needs to resupply the front lines.
Ukranian medic tells U.S. Congress of ‘hell’ in Russian captivity; Putin again supports China’s Xi
Gold settled at the lowest price in more than 2 years, pressured by strength in the $ & a rise in Treasury yields as investors expect more interest rate hikes from the Federal Reserve. Gold futures for Dec fell $31 (1.9%) to settle at $1677 an ounce. Prices for the most-active contract marked their lowest settlement since Apr 2020 & largest one-day percentage loss since Jul 5 of this year. Gold has suffered in the wake of Tues's US Aug consumer-price index reading as the $ strengthens for the week & 2-year Treasury yields touched their highest levels since 2007. The consumer-price index on Tues showed a 0.1% rise in Aug, though the forecast was for a 0.1% decline. The data reinforced expectations that the Federal Reserve is going to raise interest rates by at least 75 basis points next week & proceed with further aggressive hikes until inflation comes back under control. The Fed is expected to deliver its next interest-rate hike on Wed, with interest-rate futures pricing in the probability of at least a 75 basis point hike. Momentum & sentiment is also very bearish on expectations of a continued aggressive pace of Fed interest rate hikes at the central bank's meetings in Nov & Dec. The ICE US Dollar Index, a gauge of the $'s strength against a basket of rivals, was little changed at 109.66, but trades 0.6% higher week to date. Strength in the $ can put pressure on $-denominated commodities such as gold.
Oil futures settled at their lowest price in a week, with
the $ continuing to strengthen & investors remaining
jittery about the demand outlook, as the Federal Reserve prepares to
deliver what's expected to be another jumbo interest rate hike next
week. West Texas Intermediate crude for Oct fell $3.38 (3.8%) to settle at $85.10 a barrel. Nov Brent crude,
the global benchmark, lost $3.26 (3.5%) at $90.84 a barrel. Brent & WTI oil settled at the lowest since Sep
8. Analysts expectat the Federal Reserve to raise the
fed-funds rate by at least 75 basis points when policy makers meet next
week & stoke fears of an economic
downturn as central bankers attempt to rein in stubborn inflation. Expectations for an aggressive move by the Fed has lifted the greenback, with the ICE US Dollar Index, a measure of the currency against a basket of major rivals,
trading near a 20-year high seen last week. It edged up to 109.708 today & traded up nearly 0.7% for the week. A report earlier this week that the US could begin refilling the
Strategic Petroleum Reserve if crude falls to $80 a barrel. That news
essentially provides support for oil at the $80 level.
Oil prices settle at lowest in a week on strong U.S. dollar, demand worries
Dow Jones Industrials
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