Dow jumped 205, advancers over decliners about 2-1 & NAZ added only 3. The MLP index was even in the 221s & the REIT index rose 2+ to 379. Junk bond funds were higher & Treasuries saw limited selling, taking yields slightly higher. Oil dropped another 2+ to the 79s & gold slid back 4 to 1758.
AMJ (Alerian MLP index tracking fund)
Home sales declined for the 9th straight month in Oct, as higher interest rates & surging inflation kept buyers on the sidelines. Sales of previously owned homes dropped 5.9% from Sep to Oct, according to the National Association of Realtors (NAR). That is the slowest pace since 2011, with the exception of a very brief drop at the beginning of the Covid-19 pandemic. The Oct reading put sales at a seasonally adjusted, annualized pace of 4.4M units. Sales were 28.4% lower year-over-year. Even as sales slow, supply is still stubbornly low. There were 1.2M homes for sale at the end of Oct, an decrease of just under 1% both month-to-month & year-over-year. That’s a 3.3-month supply at the current sales pace. Historically, a balanced market is considered to be a 6-month supply. The median price of an existing home sold in Oct was $379K, an increase of 6.6% from the year before. The price gains, however, are shrinking, as the seasonal drop in home prices this time of year appears to be much deeper than usual. “Inventory levels are still tight, which is why some homes for sale are still receiving multiple offers,” said Lawrence Yun, chief economist for the NAR. “In October, 24% of homes received over the asking price. Conversely, homes sitting on the market for more than 120 days saw prices reduced by an average of 15.8%.” Overall, homes went under contract in 21 days in Oct, up from 19 days in Sep & 18 days in Oct 2021. 64%, of homes sold in Oct were on the market for less than a month, suggesting that there is still strong demand if the home is priced right.
Home sales fell for the ninth straight month in October, as higher rates scared off potential buyers
Boston Federal Reserve Pres Susan Collins expressed confidence that policymakers can tame inflation without doing too much damage to employment. “By raising rates, we are aiming to slow the economy and bring labor demand into better balance with supply,” Collins said. “The intent is not a significant downturn. But restoring price stability remains the current imperative and it is clear that there is more work to do.” She spoke as the Fed is in the midst of an aggressive campaign to bring down runaway inflation. A series of rate hikes has brought the central bank's overnight borrowing rate to 3.75-4% & virtually all other Fed officials have said they expect more increases to come. Collins noted the importance of bringing down inflation & recognized that the Fed’s moves could exact a price. Collins is a voting member of the rate-setting Federal Open Market Committee, which next meets Dec 13-14, when it is largely expected to raise its funds rate another ½ percentage point. “I remain optimistic that there is a pathway to re-establishing labor market balance with only a modest rise in the unemployment rate – while remaining realistic about the risks of a larger downturn,” Collins said, adding that she thinks “there is a pathway to reestablishing price stability with a labor market slowdown that entails only a modest rise in the unemployment rate.” Her comments follow a flurry of similar remarks from her colleagues. Markets took some hope in a report last week showing that the pace of inflation increases has slowed. But Collins said the “the latest data have not reduced my sense of what sufficiently restrictive may mean, nor my resolve.” “Sufficiently restrictive” is a benchmark the Fed has set in determining where rates need to go to bring down inflation. Current projections are around 5%, though that could change when FOMC members submit their revised outlook for rates & the economy at next month's meeting. “At the Fed we are committed to returning inflation to the 2 percent target in a reasonable amount of time. Only when inflation is low and stable can the economy in general — and the labor market in particular — work well for all Americans,” Collins added.
Fed’s Collins expresses hope that inflation can be tamed without hitting jobs
Just as the holiday shopping season gets into full swing, families are finding less slack in their budgets than before. As of Oct, 60% of Americans were living paycheck to paycheck, according to a recent LendingClub report. A year ago, the number of adults who felt stretched too thin was closer to 56%. “More consumers who have historically managed their budgets comfortably are feeling the financial strain, which will impact their spending behavior as we head into the holiday shopping season,” said Anuj Nayar, LendingClub's financial health officer. Not only are day-to-day expenses higher, but inflation has also caused real wages to decline. Real average hourly earnings are down 3% from a year earlier, according to the latest reading from the Bureau of Labor Statistics. A separate report by Salary Finance found that 2/3 of working adults said they are worse off financially than they were a year ago. Already, credit card balances are surging, up 15% in the most recent quarter, the largest annual jump in more than 20 years. Roughly ½ of shoppers said they will buy fewer things due to higher prices & more than 1/3 said they will rely on coupons or other money-saving strategies, according to a separate survey by RetailMeNot. More consumers also plan to finance their purchases this year with credit cards & buy now, pay later loans. And 25% of shoppers said they would opt for cheaper versions or more practical gifts, such as gas cards, according to another holiday survey by TransUnion. “People are trying to economize and make the most of what they have,” said Cecilia Seiden, VP of TransUnion' s retail business.
60% of Americans are living paycheck to paycheck heading into the holidays
Dow Jones Industrials
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