Dow went up 322, advancers slightly ahead of decliners & NAZ gained 61. The MLP index was up 11 to the 217s & the REIT index fell 2+ to the 343s. Junk bond funds fluctuated & Treasuries ran into selling, taking yields higher. Oil was about even in the 84s & gold added 9 to 1646.
AMJ (Alerian MLP index tracking fund)
The yield on the 10-year Treasury hit a fresh 14-year high, but bonds cut their losses after a report that some Federal Reserve officials are concerned about overtightening with rate hikes. The 10-year Treasury yield was last at 4.308%, after rising 8 basis points. It hit 4.337% at one point during the session. The benchmark note has not traded at this level since 2008. The 30-year Treasury yield, which is key for mortgage rates, jumped 15 basis points to 4.366%. The yield on the 2-year Treasury fell 4 basis points to 4.571%. Short-term rates are more sensitive to Fed rate hikes. Yields & prices have an inverted relationship. One basis point is equivalent to 0.01%. A report said that some Fed officials were growing uneasy with the current pace of rate increases & are starting to worry about the risks of overtightening. Market expectations for a 0.75 percentage point hike in Dec dipped after the report. Market concerns about a recession have been growing stronger in recent weeks, as data is reflecting signs of economic contraction, while the Federal Reserve continues to strike a hawkish tone.
10-year Treasury yield climbs to fresh 14-year high
The US budget deficit was sliced in ½ for fiscal 2022, the biggest drop in history following 2 years of huge Covid-related spending. Though still large in historical terms, the budget shortfall declined to $1.4T, compared to the 2021 deficit of $2.7T. The decline would have been steeper had it not been for the Biden administration's student loan forgiveness program. Education spending totaled $639B for the fiscal year, $408B higher than estimated. The 2022 fiscal year saw $4.9T in revenue against $6.3T in outlays. The outlays number represented about a $550B decline in spending but an $850B increase in revenue. The revenue total is by far the highest ever for the US gov. Deficits in the previous 2 years soared as Congress shelled out massive sums to combat the pandemic. The shortfall hit a record $3.1T in 2020 due to more than $5T in CARES Act & other spending. In 2019, the deficit was $983B. Prior to 2020, the highest deficit ever was $1.4T 2009 as the financial crisis came to a close. The US briefly ran a surplus from 1998-2001. In fiscal 2021, legislators passed the American Rescue Plan, a $1.9T spending package that the Biden administration said helped get the nation thru a severe health & economic crisis, but which critics say was unnecessary & helped fuel the highest inflation rate in more than 40 years. Treasury Secretary Janet Yellen said today "provides further evidence of our historic economic recovery, driven by our vaccination effort and the American Rescue Plan." Yellen added that the results also showed Pres Biden's "commitment to strengthening our nation's fiscal health."
U.S. budget deficit cut in half for biggest decrease ever amid Covid spending declines
Red-hot mortgage rates are giving home buyers & sellers cold feet. About 17% of homes that went under contract with real estate brokerage Redfin last month were called off. The
technology-powered real estate firm reported that approximately 60K
deals fell thru in Sep, marking the "highest share on record
aside from March 2020," the same month the World Health Organization
declared the coronavirus pandemic. Redfin
Economics Research Lead Chen Zhao said the housing market is at
"another standstill" although it's completely different from the early
days of the pandemic. "Demand
is slumping due to surging mortgage rates, but prices are being propped
up by inflation and a drop in the number of people putting their homes
up for sale," Zhao added. It's forcing many to stay put especially if they locked in "a rock-bottom mortgage rate during the pandemic," he added. As a result, deals are falling thru & buyer completion is waning. Freddie
Mac reported yesterday that the 30-year fixed-rate mortgage averaged
6.94%. A year ago the rate was 3.09%. These rates have driven monthly
housing payments for buyers up more than 50% compared to a year ago. The number of home sales dropped 25% in Sep compared to a year
ago. New Listings
also plunged 22%, which marked the largest drop since May 2020. On top of that, less than ½ of the offers from Redfin agents faced competition last month, which marked another record low since the start of the pandemic. Zhao projected the housing market will get worse before getting better as the Federal Reserve continues to battle inflation.
60K real estate deals called off in September
The economy keeps showing signs of weakness. But optimists are hoping smaller hike hikes will be a plus. Today's rally is unimpressive with a weak advance/decline ratio. Many are uncertain.
Dow Jones Industrials
No comments:
Post a Comment