Markets rise after GDP grows in Quarter 3

Dow advanced 197 (near session lows), advancers over decliners 3-2 but NAZ gave back 178. The MLP index rose 2+ to the 225s & the REIT index added 1+ to the 363s.  Junk bond funds were mixed & Treasuries continued in demand, lowering yields.  Oil was up 1+ to the 89s & gold declined 6 to 1662 (more on both below).

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The average rate for a 30-year fixed mortgage topped 7% for the first time in 2 decades.  Freddie Mac reported that the average long-term US mortgage rate climbed to 7.08% from 6.94% a week ago.  A year ago, the 30-year rate averaged 3.14%.  "The 30-year fixed-rate mortgage broke seven percent for the first time since April 2002, leading to greater stagnation in the housing market," said Sam Khater, Freddie Mac's chief economist.  The 15-year fixed-rate mortgage averaged 6.36%, up from last week's average of 6.23%.  A year ago at this time, the 15-year FRM averaged 2.37%.  Finally, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 5.96%, up from last week's 5.71% average.  A year ago at this time, the 5-year ARM averaged 2.56%.  "As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month," he continued.  "In fact, many potential homebuyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward."  Mortgage rates don't necessarily mirror the Fed's rate increases, but tend to track the yield on the 10-year Treasury note.  That's influenced by a variety of factors, including investors' expectations for future inflation & global demand for Treasuries.  Many potential homebuyers have moved to the sidelines as mortgage rates have more than doubled this year.  Sales of existing homes have declined for 8 straight months as borrowing costs have become too high a hurdle for many Americans already paying more for food, gas & other necessities.  Meanwhile, some homeowners have held off putting their homes on the market because they don't want to jump into a higher rate on their next mortgage.

Mortgage rates surge to highest mark in two decades

Treasury yields slid after the latest US GDP report showed some signs that inflationary pressures could be easing.  The yield on the 10-year Treasury dipped 9 basis points to 3.927%.  The benchmark note had been declining for the last 2 days.  The policy-sensitive 2-year Treasury yield was down 9 basis points at 4.33%.  Yields & prices have an inverted relationship.  One basis point equals 0.01%.  The report for US GDP showed 2.6% economic growth in Q3.  The forecast was expecting 2.3%.  In addition to showing stronger than expected growth, the GDP report provided at least some good news on inflation.  The chain-weighted price index, a cost-of-living measure that is adjusted to reflect changing consumer behavior, rose 4.1% for the qtr, well below the 5.3% estimate.  Also, headline inflation rose 4.2%, down sharply from 7.3%, according to a gauge the Federal Reserve uses.

Treasury yields fall after GDP report shows some signs of inflation easing  

Slightly more Americans applied for unemployment benefits last week as the labor market remains one of the healthiest parts of an uneven US economy.  Jobless claims for last week inched up by 3K to 217K from 214K the previous week, the Labor Dept reported.  The 4-week moving average rose to 219K from 212K the previous week.  Applications for jobless claims, considered a proxy for layoffs, have remained historically low even as the Federal Reserve has cranked up its benchmark borrowing rate in an effort to cool the economy & tame inflation.  Fed officials have warned that the unemployment rate will likely have to rise as part of their fight against rising prices & the most recent gov jobs report likely snuffed out any hope that the Fed would pause rate increases when it meets in next week.

Jobless claims edge up but still remain historically low

Gold futures declined, a day after prices posted their highest finish in nearly 2 weeks.  The precious metal saw prices drop after a better-than-expected US GDP number, with the thinking being that a more robust growth number would strengthen the Federal Reserve's resolve to keep hiking interest rates.  However, gold's price recovered some of its losses after that more bearish reaction.  Gold for Dec fell $3 to settle at $1665 an ounce after trading as low as $1658.

Gold ends lower, a day after prices settle at their highest in nearly 2 weeks

Oil futures settled higher, stretching their gains into a 3rd straight session on the back of US GDP data showing that the nation's economy grew at an annual 2.6% pace in the 3rd qtr, following 2 straight qtrs with declines.  US benchmark West Texas Intermediate crude for Dec rose $1.17 (1.3%) to settle at $89.08 a barrel.  That was the highest front-month contract finish since Oct 13.

Oil prices settle higher, supported in part by third-quarter growth in the U.S. economy

Growth in the economy for the last qtr was a welcome relief for investors.  Unfortunately that also implies the Fed has more work to do raising interest rates.  The next meeting is next week.  Meanwhile the inverted yield curves continues in effect (interest rates are higher on short Treasury debt than longer term Treasuries).  That is a classic sign a recession is coming & it might get more attention tomorrow.  Already there was a little selling into the close.

Dow Jones Industrials