Dow sank 333, decliners over advancers almost a staggering 6-1 & NAZ was off 67. The MLP index declined 2+ to the 215s & the REIT index dropped 7+ to the 392s. Junk bond funds saw more selling & Treasuries were heavily sold, raising the yield on the 10 year Treasury up 11 BP to 3.59% (more below). Oil fell 1+ to the 83s & gold slid back 5 to 1672.
AMJ (Alerian MLP index tracking fund)
US manufacturers, plagued by supply chain issues & near record-high inflation, demand action from politicians as the midterm elections rapidly approach. The National Association of Manufacturers (NAM) on last week released its "Competing to Win" agenda, calling for action in tax policy, workforce development & other areas to boost US manufacturing competitiveness. NAM CEO Jay Timmons & board members also discussed the call to action plan yesterday. "Solving problems is what manufacturers do, but we need additional solutions from policymakers to ensure we can stay competitive and become more competitive, especially with the potential of a recession looming," Chuck Wetherington, pres of BTE Technology, said. GDP fell the first 2 qtrs of 2022. Wholesale Inflation remained high in Aug, with the annual figure rising 8.7% from a year ago. One area in which the NAM has called for elected leaders to take action is workforce development. Labor shortages in the manufacturing sector are a "long-term problem," Wetherington said. Both Wetherington & Greene Tweed VP of Operations Fernando Torres said manufacturers have been working to "upskill" existing workers & attract new ones. To address sector-wide workforce challenges, the NAM has called for expanding the Pell Grant programs to "include short-term or accelerated education models" & for investing in apprenticeship and "earn-and-learn" programs. The amount of tax-exempt educational assistance employers can offer workers should be upped to $11K annually, the group argued in its plan. The NAM has also said immigration reform can help address workforce challenges, calling for politicians to increase employment-based immigration as a percentage of green cards & to change nonimmigrant visas & temporary worker programs.
US manufacturers demand action as midterm elections approach
Treasury yields marched higher as traders awaited the Federal Reserve's decision on interest rate hikes due out tomorrow. The policy-sensitive 2-year Treasury gained about 3 basis points, reaching 3.983% — a level it had not hit since 2007. The yield on the 10-year Treasury jumped to 3.593%, trading near levels not seen since 2011. Yields & prices have an inverted relationship & one basis point equals 0.01%. The Federal Reserve's Sep meeting, where the central bank is set to make decisions about how much it will hike interest rates to curb persistent inflation, begins today. Analysts & traders are anticipating a 75 basis point hike, which markets have already begun to price in. Others believe the Fed will go further than that & implement a 100 basis point increase, which would be the largest rate hike in 40 years. Before the Federal Reserve interest rate decision, investors will get insights into the housing market, with data on building permits & housing starts for the month of Aug.
2-year Treasury yield reaches fresh 15-year high
New US home construction unexpectedly surged in Aug, but a decline in building permits underscores how rising interest rates are continuing to cool overall demand for housing. Housing starts climbed 12.2% last month to an annual rate of 1.57M units, according to new Commerce Dept data. That's above the forecast for a pace of 1.44M units. The increase stemmed from a jump in multi-family housing construction, evidence that rising borrowing costs combined with steep home prices are pushing potential homebuyers out of the market. Applications to build – which measures future construction – slowed to an annual rate of 1.5M units, which is the lowest since Jun 2020. The data comes one day after the release of the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market. The gauge fell for the ninth consecutive month to 46, marking the worst stretch for the housing market since the 2008 financial crisis. Any reading above 50 is considered positive; prior to this year, the gauge has not entered negative territory since a brief – but steep – drop in May 2020. The index has fallen considerably from just one year ago, when it stood at 76. It peaked at a 35-year high of 90 in Nov 2020, buoyed by record-low interest rates at the same time that American homebuyers – flush with cash & eager for more space during the pandemic – started flocking to the suburbs. "Builder sentiment has declined every month in 2022," NAHB chief economist Robert Dietz said. "And the housing recession shows no signs of abating as builders continue to grapple with elevated construction costs and an aggressive monetary policy from the Federal Reserve." The average rate for a 30-year fixed mortgage climbed to 6.02% last week, according to mortgage lender Freddie Mac. That is significantly higher than just one year ago when rates stood at 2.86%.
New home construction spikes to highest level in months despite steep prices
All thoughts are gloomy today. After the rate hike tomorrow, guidance about future interest rate hikes will be watched carefully by investors. Then there are lingering thoughts about extending the recession which has already started in H1. There is very little for investors to cheer today.
Dow Jones Industrials
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