Dow rebounded 158, advancers over decliners about 2-1 & NAZ added 13. The MLP index was even in the 218s & the REIT index rose 3+ to the 383s. Junk bond funds fluctuated & Treasuries had more buying which lowered yields. Oil slid to the 73s, another 1 year low, & gold went up 10 to 1792.
AMJ (Alerian MLP index tracking fund)
The chief execs of America's biggest companies are feeling increasingly sour about the state of US economy as it confronts the duel threat of high inflation & rising interest rates. The Business Roundtable said its CEO Economic Outlook Index plunged 11 points during Q4 to the lowest level in more than 2 years. Still, at 73, the index remains above the expansion or contraction threshold of 50. “With continued supply chain challenges & inflation uncertainty, many CEOs remain cautious about domestic plans and expectations for the next six months," General Motors CEO Mary Barra, the Business Roundtable chair, said. Sentiment fell across the board. Plans for hiring tumbled by 17 points, expectations for sales declined by 8 points & plans for capital investment dropped by 7 points over the last qtr. The biggest problems facing CEOs are growing labor costs & an increase in material costs, ongoing supply chain disruptions & price pressures from the energy sector, according to the survey, which was conducted between Oct 31 - Nov 28. It featured responses from 142 CEOs.
CEO optimism plunges to two-year low as US economy teeters on brink of recession
Logistics managers are sending the message to clients that the ocean freight market is correcting itself at a faster pace than anticipated. Shipping firm HLS recently wrote to clients, “We initially expected the market was about to correct itself and normalize some time in 2023, but it comes much earlier than we expected.” The peak in the market, according to Alan Baer, CEO of OL USA, was the 2nd qtr. “From there a steady decline,” Baer said. The market may have reached the low point in Nov, he said, but added, “it is still too early to tell if this is a trend.” Despite the spot market collapse, the major shipping lines reported nearly $122B in profits over the first 3 qtrs, according to Sea-Intelligence CEO Alan Murphy. Trade data shows a decline in Asia imports to the U.S. by 11% year-over-year in Oct, which built on a Sep decline. “We don’t find any grounds for optimism in November,” HLS told clients. The ocean freight contract market tracked by Xeneta's global XSI recorded a drop of 5.7% in Nov, the 3rd month in a row rates have dropped & the largest month-over-month decline recorded since the launch of the XSI in 2019, according to Peter Sand, chief analyst at Xeneta. “For many carriers, the fall in the XSI will trigger the fall in their average rates and will bring an end to record-breaking quarters,” he said. Sand expects the challenging environment to continue given the 40% drop in Chinese manufacturing orders & logistics managers expecting demand normalization to not occur until next summer. Xeneta data indicates that 85% of customers plan to decrease ocean freight spending in 2023, while 42% say their volumes will stay “stable/consistent” with 2022, which Sand said suggests a further declined in cargo volumes.
Freight rates from China to West Coast down 90% as global trade falls off fast
Lower mortgage rates are pulling some current homeowners back to the refinance market, but not enough to offset the drop in demand from homebuyers. Mortgage application volume fell 1.9% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647K or less) decreased to 6.41% from 6.49%, with points decreasing to 0.63 from 0.68 (including the origination fee) for loans with a 20% down payment. That is 73 basis points lower than it was a month ago but still more than 3 full percentage points higher than it was a year ago. Applications to refinance a home loan rose 5% for the week but were still 86% lower than the same week one year ago. There are still precious few current borrowers who can benefit from a refinance at today's higher interest rates. The refinance share of mortgage activity increased to 28.7% of total applications from 26.1% the previous week. Mortgage applications to purchase a home fell 3% for the week & were 40% lower than the same week one year ago. “Purchase activity slowed last week, with a drop in conventional purchase applications partially offset by an increase in FHA and USDA loan applications,” noted Joel Kan, an MBA economist in a release.
Mortgage demand falls again even as rates sink further
Global economies continue to struggle as shown above. Additional troubling signals are US oil at a new 1 year low (on worries about less demand for oil) & more announcements about corp layoffs. It sure feels like this is a recession even it's only mild presently.
Dow Jones Industrials
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