Dow dropped 192, decliners over advancers 5-2 & NAZ pulled back 100. The MLP index declined 3+ to the 222s & the REIT index went up 2 to the 368s. Junk bond funds slid lower & Treasuries were purchased, lowering yields (more below). Oil fell 2+ to the 86s & gold was about even at 1715 after heavy buying recently.
AMJ (Alerian MLP index tracking fund)
The federal gov added $83B to the national debt in the first month of fiscal year 2023, according to the Congressional Budget Office (CBO), a rate of $2.7B in new debt per day that puts the gov on track for another $1T deficit this year. While the new debt racked up in Oct is substantial, it is much lower than borrowing levels seen over the last few years during COVID. The $83B is ½ the size of the borrowing seen in Oct 2021 & reflects the winding down of emergency spending that was approved to deal with the pandemic. Only 7 of the last 25 months have resulted in deficits under $100B or with a budget surplus & 9 of those months saw deficits above $200B. The report on Oct numbers also reviewed fiscal year 2022 & noted that areas of the gov that dealt directly with COVID spent about $1.3T less in 2022 than they did in 2021. For example, the gov spent $486B less on refundable tax credits in 2022, $375B less on unemployment compensation, $300B less on small business loans & $138B less on relief to state, local & tribal govs. However, some spending increased, most notably at the Dept of Education which booked nearly $400B in more expenses in order to pay for Pres Biden's student loan handout.
Biden on track for $1 trillion budget deficit in 2023
Treasury yields were mixed as markets closely watched
midterm election results & it remained unclear which party would be in
control of the House of Representatives & Senate. The yield on the benchmark 10-year Treasury was up one basis point to 4.14% & the 2-year Treasury yield was little changed at 4.674%. Yields & prices move in opposite directions & one basis point is equivalent to 0.01%. The outcome of the US congressional midterm elections could lead to a shift in spending & monetary policy if Reps take over control of the House & Senate from Dems. Market concerns about persistently high inflation could therefore be affected by the results. Investors are looking to the release of Oct's consumer inflation
figures tomorrow to assess whether the Fed's policy is beginning to
show effects.
Treasury yields mixed as U.S. midterm election results roll in
Mortgage applications continued on a slight downward trend over the past week, according to the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications weekly survey. The survey showed the Market Composite Index decreased 0.1% on a seasonally adjusted basis from one week earlier. The Index decreased 2% on an unadjusted basis during the same timeframe. The Refinance Index decreased 4% from the previous week & was 87% lower than the same week last year. On the other hand, the seasonally adjusted Purchase Index increased 1% during the previous week, while the unadjusted Purchase Index decreased by 1%, making it 41% lower than this time last year. The survey showed the Market Composite Index decreased 0.1% on a seasonally adjusted basis from one week earlier. The Index decreased 2% on an unadjusted basis during the same timeframe. The Refinance Index decreased 4% from the previous week & was 87% lower than the same week last year. MBA VP & Deputy Chief Economist Joel Kan stated mortgage rates edged higher last week after the Federal Reserve announced short-term rates will continue to rise in efforts to combat high inflation. For the 3rd consecutive week, the 30-year fixed rate remained above 7% as most loan types saw increases, Kan added.
Mortgage applications decrease as high interest rates deter homebuyers: survey
Traders don't like uncertainty & so they are on the sidelines until more is known about the midterm elections. Tomorrow's inflation data will bring them back.
Dow Jones Industrials
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