Dow gained 224, advancers over decliners 2-1 & NAZ went up 71. The MLP index fell 1+ to the 216s & the REIT index added 2+ to the 394s. Junk bond funds crawled higher & Treasuries had a little buying (more below). Oil rose 1+ to the 77s & gold was off 3 to 1822.
AMJ (Alerian MLP index tracking fund)
Optimism among CFOs
about their own companies dropped for a 3rd consecutive qtr,
marking the lowest it's been since midway thru 2020, according to a
survey released today. "CFO Signals" survey, the consulting firm Deloitte
found that CFO net optimism in connection to their companies' prospects
came in at -21 for the 4th qtr of 2022. That figure was a few points more negative than Q3 & 10 more than Q2. Net optimism, as measured by the difference between the share of CFOs
respectively expressing higher & lower levels of optimism, hasn't
been at such a low level since 2020's 2nd qtr, when it was -54. During
the latest qtr, 41% of CFOs surveyed suggested they were "more
pessimistic" about their companies' prospects than they were a few
months earlier, compared to 20% who said they were "more optimistic." The
share of CFOs who indicated they thought it was a good time for
risk-taking also came in at a low, similar to but slightly higher than
in the 2nd qtr of 2020. In this year's 4th
qtr, 29% said they favored taking more risks, just 2% higher than
the 27% in 2020's Q2. Last qtr, the
proportion who favored risk-taking saw an increase. Both internal & external risks weighed on CFOs during Q4. The consulting firm reported geopolitics & stability
was the top cited external risk at 54%, followed by inflation (41%) &
policies & regulations (29%). More than a qtr, 27%, said the
possibility of a recession caused them the most anxiety. Meanwhile, internally, retention of workers, prioritization & execution of strategies, & recruiting were found to be stressing CFOs the most. Additionally, outlooks for the economies of Europe, China, the rest of Asia & South America over the next year
went down to varying degrees in comparison to last qtr,
respectively coming it at 9%, 19%, 18% & 8% for CFOs indicating they
anticipate things improving in those regions. For North America's
economy, expectations remained the same qtr-over-qtr, with 29%
of CFOs saying the region's conditions would be "better in a year." CFOs, when considering 2023, pointed to a potential recession, inflation & consumer purchasing power most often as factors that had the
greatest potential to constrain company financial goals. 37% cited the category "economy/recession," while 18% said rising
costs & 13% indicated "consumer purchasing power/sentiment. "
Optimism among CFOs about their own companies drops again
Treasury yields were little changed as investors awaited the outcome of the Federal Reserve's December meeting. The yield on the benchmark 10-year Treasury note dipped below the 3.5% level, last falling more than 1 basis point to 3.488%. The 2-year Treasury was last down about 5 basis points to 4.176%. Yields & prices have an inverted relationship. One basis point equals 0.01%. Investors are widely expecting the Fed to announce a 50 basis point interest rate hike after its last meeting of the year. That would be a slight reduction compared with those after the central bank's last 4 meetings, which each saw rates being hiked by 75 basis points. The pace had prompted investor concerns that the Fed's policy would lead the US economy into a recession. Fed Chair Jerome Powell is also due to give a press conference after the meeting ends. Investors are hoping to receive guidance on monetary policy & the central bank's assessment of inflation & the state of the wider US economy. Consumer price index data released on yesterday indicated that inflationary pressures are easing. Prices rose by 0.1% in Nov from Oct & by 7.1% on a yearly basis. Both figures came in lower than expected.
10-year Treasury yield dips below 3.5% ahead of Fed rate decision
After a month of declines, mortgage application volume is rising, as current homeowners & potential buyers move on lower mortgage rates. Applications rose 3.2% last week compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647K or less) did increase ever so slightly last week to 6.42% from 6.41%, with points increasing to 0.64 from 0.63 (including the origination fee) for loans with a 20% down payment. But the trajectory for rates has been lower for the past month, as gov reports showed inflation was cooling. Interest rates slid today after the release of the Nov consumer price index. Mortgage applications to refinance a home loan rose 3% last week from the previous week but were still 85% lower than the same week one year ago. The drop in rates from a high of just over 7% in Oct added to the still-tiny pool of potential borrowers who could benefit from a refinance. Mortgage applications to purchase a home rose 4% for the week & were 38% lower than the same week one year ago. That annual comparison is now shrinking slightly as rates drop. “The ongoing moderation in home-price growth, along with further declines in mortgage rates, may encourage more buyers to return to the market in the coming months,” Joel Kan, an MBA economist, said.
Mortgage demand inches higher as interest rates move lower
Today's rally in stocks comes from hopes that Powell will give investors a good message. We'll see.
Dow Jones Industrials
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