Dow fell 122, decliners modestly ahead of advancers & NAZ lost 7. The MLP index was steady in the 233s & the REIT index gave back a fraction to 401. Junk bond funds slid lower & Treasuries saw more selling, raising yields. Oil declined 1+ to the 77s on higher inventories & gold sank 19 to 1845.
AMJ (Alerian MLP Index tracking fund)
Sales at retailers rose far more than expected in Jan as consumers persevered despite rising inflation pressures. Advance retail sales for the month increased 3%, compared with expectations for a rise of 1.9%, the Commerce Dept reported. Excluding autos, sales rose 2.3% which is not adjusted for inflation. The ex-autos estimate was for a gain of 0.9%. Food services & drinking places surged 7.2% to lead all major categories. Motor vehicle & parts dealers increased 5.9%,while furniture & home furnishing stores saw a rise of 4.4%. Even with a 2.4% increase in gas prices, receipts at service stations were flat. Online retailers saw an rise of 1.3%, while electronics & appliances stores increased 3.5%. No categories saw a decline, following a Dec in which sales fell 1.1%. On a year-over-year basis, retail sales increased 6.4%, which was exactly in line with the consumer price index move reported yesterday.
Retail sales jump 3% in January, smashing expectations despite inflation increase
The consumer price index (CPI) rose 6.4% in Jan on an annual basis, hotter than expected, but remained steady compared to last month. The latest read presents more challenges for Federal Reserve Chair Jerome Powell who has hinted that disinflation is underway. Still, elevated costs for everyday staples remain stubbornly high. The Labor Dept reported that the CPI, a broad measure of the price of everyday goods that includes gasoline, groceries & rents, rose 0.5% on the month in Jan after a surprise decline of 0.1% in Dec. Annually prices remain above 6% but are down sharply from the 9.1% surge in Jun, which marked the highest inflation rate in almost 41 years. Still, inflation is expected to remain roughly 3 times higher than the pre-pandemic average on an annualized basis, underscoring the persistent financial burden placed on Ms of US households by high prices. When factoring out volatile food & energy costs, the core consumer price index rose 0.4% in Jan, slightly above Dec's 0.3% increase. Annually, core CPI ticked up 5.6% in Jan, more than expected. It's still lower than Sep's 6.6% increase, which was the highest in 40 years. Powell has previously acknowledged that disinflation has begun, but the Fed chair also says there is still a long way to go to reach the central bank's desired 2.0% inflation rate. The markets initially welcomed this message, sending risk assets like stocks higher. But recent concerns that the Fed will keep rates higher for longer have investors worried about a policy mistake.
Americans aren't out of the woods with inflation yet, new data shows
America's homebuilders are growing more bullish as buyer demand picks up, driven in part by slightly lower mortgage rates. Homebuilder confidence in the market for newly built single-family homes in Feb rose 7 points to 42, according to the National Association of Home Builders/Wells Fargo Housing Market Index. This is the highest reading since Sep & the largest monthly gain since Jun 2013. Anything below 50 is considered negative, but sentiment had fallen to 31 in Dec. The index stood at 81 in Feb of last year, before mortgage rates began to rise. Builders say affordability is improving, as mortgage rates fall back from their highs of last fall & start to settle in a narrow range. The average rate on the popular 30-year fixed mortgage had peaked at 7.37% last Oct, according to Mortgage News Daily, but spent much of Jan in the low 6% range. Rates have moved up slightly in the past 2 weeks to the mid-6% range. “With the largest monthly increase for builder sentiment since June 2013, the HMI indicates that incremental gains for housing affordability have the ability to price-in buyers to the market,” said NAHB Chair Alicia Huey. “The nation continues to face a sizeable housing shortage that can only be closed by building more affordable, attainable housing.” Huey called it “cautious optimism,” adding that affordable housing is still difficult to build, given higher costs for labor & materials. Of the NAHB index's 3 components, current sales conditions in Feb rose 6 points to 46. Sales expectations in the next 6 months increased 11 points to 48 & buyer traffic increased 6 points to 29. “Even as the Federal Reserve continues to tighten monetary policy conditions, forecasts indicate that the housing market has passed peak mortgage rates for this cycle,” said NAHB chief economist Robert Dietz. “And while we expect ongoing volatility for mortgage rates and housing costs, the building market should be able to achieve stability in the coming months, followed by a rebound back to trend home construction levels later in 2023 and the beginning of 2024.”
Homebuilder sentiment in February improved by the biggest amount in a decade
Retail sales data suggests the Fed will see it as a signal that inflation pressures are still a nagging factor. Of course higher sales were affected by inflation for many goods & services. The Dow continues to stay near 34K.Dow Jones Industrials
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