Dow fell 112 from late day selling, advancers over decliners about 2-1 & NAZ went up 66. The MLP index crawled up 1+ to the 224s & the REIT index was flattish in the 378s. Junk bond funds continued higher & Treasuries saw more buying, taking yields lower. Oil added 1 to the 74s & gold rose 8 to 1878 (more on both below).
AMJ (Alerian MLP Index tracking fund)
![Live 24 hours gold chart [Kitco Inc.]](https://www.kitco.com/images/live/gold.gif?0.2180338269244485)
Consumers see inflation falling considerably over the next year to
the lowest level since Jul 2021, according to a key Federal Reserve
Bank of New York survey, a potentially reassuring sign
for the US central bank as it tries to cool surging prices. The median expectation is that the inflation rate will be up 5% one year from now, according to the New York Federal
Reserve's Survey of Consumer Expectations. Americans are less certain
about the prospect of inflation falling over the long term. 3
years from now, consumers see inflation hovering around 3%, unchanged
from Nov. Over the next 5 years, Americans anticipate that
prices will remain above the Fed's 2% goal, projecting the inflation
rate will hover around 2.4% in 2028. "Median inflation
uncertainty—or the uncertainty expressed regarding future inflation
outcomes—was unchanged at the short-term horizon and decreased at the
medium-term horizon," the survey found. The decline stemmed from a big drop in expectations for the cost of
food & gas, with Americans forecasting a decline of 0.7% over the next
year for both categories. However, consumers are bracing for home
prices to rise 0.3% to 1.3% this year. The report is based on a rotating panel of 1300 households. The survey plays a critical role in determining how Fed policymakers respond to the inflation
crisis. That is because actual inflation depends, at least in part, on
what consumers think it will be. It is sort of a self-fulfilling
prophecy – if everyone expects prices to rise by 3% in the year, that
signals to businesses that they can increase prices by at least 3%. Workers, in turn, will want a 3% pay raise to offset the rising costs.
Americans reveal expectations for inflation over the next year
Mortgage rates are still twice what they were a year ago, but home prices have been falling since Jun, & that's finally making consumers feel better about what had been an overheated, highly competitive housing market. A monthly housing sentiment index from Fannie Mae showed sentiment improving from Nov-Dec. The index is still lower than it was a year ago & just slightly off its record low set in Oct & Nov. The share of respondents saying now is a good time to buy a home was still low, at just 21%, but it was up from 16% in Oct. The share saying now is a bad time decreased. On selling, however, sentiment continued to drop. The share of respondents saying now is a good time to sell dropped to 51% from 54%, while the share saying now is a bad time to sell increased. More consumers now believe home prices will fall in the next 12 month & more also said they believe mortgage rates will come down. Prices in Nov, the most recent measurement, were 2.5% lower than the spring 2022 peak, according to CoreLogic. They were still over 8% higher year over year, but that annual comparison is now ½ of what it was in Jun. The average rate on the popular 30-year fixed mortgage hit a recent high of 7.37% in Oct but then fell back into the mid-6% range throughout Nov & into Dec. As of last Fri it had dropped to 6.2%, according to Mortgage News Daily. “As we enter 2023, we expect affordability to remain the top challenge for potential homebuyers, as even small declines in rates and home prices — from the perspective of the buyer — may not produce sufficient purchasing power,” said Doug Duncan, Fannie Mae's senior VP & chief economist. “At the same time, existing homeowners may continue to wait to list their properties, since many have already locked in lower mortgage rates, creating minimal incentive to sell and buy again until rates are more favorable.” That tension will continue to drive home sales lower in the coming months. Adding to the confidence in housing, the share of consumers who said they were concerned about losing their jobs in the next 12 months dropped from 21% to 17%. Fewer, however, said their household income is significantly higher than it was a year ago.
Consumer confidence in housing finally rises, thanks to falling home prices
Macy's (M) warned its holiday-qtr sales will come in on the lighter side,
saying consumers' budgets are under pressure & that it anticipates
that squeeze to continue into this year. The department store
operator said net sales are now expected to be at the low-to midpoint
of its previously expected range of $8.16-8.4B. It
expects adjusted diluted EPS to be in the previously
issued range of $1.47-1.67. For the year-ago period, revenue was $8.67B adjusted EPS was $2.45. Macy's
is the latest retailer to provide clues about the consumer, as
investors await holiday results & look for signs of whether demand is holding up as inflation remains high. CEO Jeff Gennette said Macy's put up strong Black Friday & Cyber
Monday sales & saw strength in gift-giving & occasion apparel, but
“the lulls of the non-peak holiday weeks were deeper than anticipated.” He said that the retailer, which includes higher-end department store chain
Bloomingdale's & beauty chain Bluemercury, has taken action to prepare
for a year that may be tougher. For instance, he said, it has closely
managed its inventory so it can stay nimble & has the merchandise that
customers want. The stock dropped 1.69 (8%).
If you would like to learn more about Macy's, click on this link:
club.ino.com/trend/analysis/stock/M_aid=CD3289&a_bid=6ae5b6f7
Macy’s warns holiday-quarter sales will come in light, citing squeeze on wallets
Gold futures climbed, with prices based on the most-active contract settling at their highest since May 6. The upside momentum for gold has been fueled by Fri's mixed US jobs report, which fanned speculation around the Federal Reserve slowing its rate hikes. Given how the fundamental drivers are swinging in favor of bulls, further upside could be on the cards with the pending US inflation report acting as a potential catalyst. The Dec reading of the consumer price index will be released on Thurs. Gold for Feb rose $8 (0.4%) to settle at $1877 an ounce.
Gold Futures Log Highest Finish Since Early May
U.S. oil futures log a third straight session gain
Selling in the PM took the Dow into the red & buyers stayed away for the rest of the day. Gloomy warnings from big companies are being taken seriously.
Dow Jones Industrials
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