Wednesday, January 4, 2023

Markets edge higher on economic data and prior to Fed minutes

Dow rose 88, advancers over decliners better than 4-1 & NAZ went up 49.  The MLP index was steady in the 214s & the REIT index advanced 7+ to the 377s.  Junk bond funds continued in demand & Treasuries saw more heavy buying, reducing yields.  Oil  dropped another 3+ to 73 & gold jumped 18 to 1864, another 6 month high.

AMJ (Alerian MLP index fund)


 

 




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Many adults in the US have dark predictions for how America will fare economically in 2023, according to recent poll.  Gallup said hat one of its polls found 79% of US adults projected a "year of economic difficulty" for 2023.  Less than a qtr of Americans, 20%, were more optimistic when asked whether prosperity or struggle would be more likely, anticipating "economic prosperity" for the country, according to the poll.  There was also pessimism about inflation in 2023.  Inflation measured by the Consumer Price Index continues to hover around painfully high levels, though it did cool somewhat in Nov.  It went up 0.1% from the prior month & 7.1% year-over-year in Nov.  65% of US adults predict it is more likely prices "will rise at a high rate" in 2023.  Americans were less pessimistic about employment in 2023, with 53% giving predictions of more unemployment &46% anticipating "full or increasing" employment, per the polling.  The Bureau of Labor Statistics reported the unemployment rate in Nov was 3.7%.  It has "been in a narrow range of 3.5% to 3.7% since March," the agency said in its Dec release.  In the same Gallup poll, slightly less than 2/3, 63%, said they predicted the stock market will go down in 2023.  A large percentage of Americans, the poll also found, had a negative outlook about taxes.  About 81% indicated they thought a "year when taxes will rise" was more probable for 2023 than a decrease.   A large percentage of Americans, the poll also found, had a negative outlook about taxes.  About 81% indicated they thought a "year when taxes will rise" was more probable for 2023 than a decrease.  Additionally, 78% are anticipating the federal gov making its budget deficit larger. 

Massive number of Americans forecasting economic difficulty in new year, poll finds

US job openings posted a surprise increase in Nov despite an aggressive campaign by the Federal Reserve to raise interest rates & cool the labor market.  The Labor Dept said that there were 10.5M job openings in Nov.  The number of available jobs has topped 10M for 13 consecutive months; before the pandemic began in Feb 2020, the highest on record was 7.7M.  The Federal Reserve closely watches these figures as it tries to gauge labor market tightness; the increase in openings could be reason for concern among policymakers as they try to slow the economy & cool painfully high inflation.

Job openings unexpectedly rise in November despite Fed efforts to cool labor market

After a brief reprieve in the first ½ of Dec, mortgage interest rates shot up again to end the year, weighing on mortgage demand.  Mortgage application volume was down 13.2% at the end of last week from 2 weeks earlier, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  The MBA was closed last week due to the holidays.  The average contract interest rate for 30-year fixed-rate mortgages with conforming balances ($647K or less), for loans with a 20% down payment, increased to 6.58% from 6.34% 2 weeks prior.  At the end of 2021, the rate was 3.33%.  Demand for refinancing, which is most sensitive to weekly interest rate changes, dropped 16.3% from 2 weeks earlier & was down 87% from the same period in 2021.  “Mortgage rates are lower than October 2022 highs, but would have to decline substantially to generate additional refinance activity,” noted Joel Kan, an MBA economist.  Mortgage applications to purchase a home dove 12.2% from 2 weeks earlier & were down 42% year over year.  They ended the year at the lowest level since 1996.  Mortgage rates started this week, & this year, slightly lower, but all eyes are now on the all-important monthly employment report expected to be released Fri.

Mortgage demand plunges 13.2% to end 2022, as interest rates head higher again

Economic data keeps coming in mixed. Meanwhile, demand for gold & Treasuries cotinues to be strong.

Dow Jones Industrials

 






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