Dow rose 108 reversing an early loss, advancers over decliners about about 5-2 & NAZ went up 83. The MLP index crawled up to the 227s & the REIT index added 1+ to the 387s. Junk bond funds gained along with stocks & Treasuries had more buying, reducing yields. Oil gained 1+ to the 75s & gold dropped 10 to 1830 (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)
The average rate on a 30-year fixed mortgage rose to 6.5% from 6.32% last week, according to mortgage buyer Freddie Mac. A year ago, the average rate was 3.89%. The 15-year fixed-rate mortgage averaged 5.76%, up from last week when it averaged 5.51%. A year ago at this time, the 15-year FRM averaged 3.14%. "The economy continues to show strength, and interest rates are repricing to account for the stronger than expected growth, tight labor market & the threat of sticky inflation," said Sam Khater, Freddie Mac's Chief Economist. Despite fluctuations, mortgage rates have been trending upward. Since peaking in Nov, mortgage rates still remain nearly double what they were a year ago. For all of 2022, the National Association of Realtors reported last month that existing US home sales fell 17.8% from 2021, the weakest year for home sales since 2014 & the biggest annual decline since the housing crisis began in 2008. Higher rates can add hundreds of $s a month in costs for homebuyers, on top of already high home prices. Khater added, "Our research shows that rate dispersion increases as mortgage rates trend up. This means homebuyers can potentially save $600 to $1,200 annually by taking the time to shop among lenders to find a better rate."
Mortgage rates climb for third week on threat of sticky inflation
The number of Americans filing new claims for unemployment benefits unexpectedly fell last week, pointing to a persistently tight labor market & further fueling fears that the Federal Reserve could raise interest rates higher than anticipated. Those worries were amplified by other data showing inflation was much stronger than initially thought in Q4, which raises the risk of higher readings when the gov publishes Jan's personal consumption expenditures (PCE) price data tomorrow. While the Fed is expected to deliver 2 additional rate hikes of 25 basis points in Mar & May, financial markets are betting on another increase in Jun. The central bank has raised its policy rate by 450 basis points since last Mar from near zero to 4.50-4.75%. Initial claims for state unemployment benefits decreased 3K to a seasonally adjusted 192K last week, the Labor Dept reported. The forecast called for 200K. Unadjusted claims declined 14K to 211K. Claims for 4 states including California were estimated, likely because of the Presidents' Day holiday, which usually means less time for state offices to process applications. Claims for California were estimated to have fallen sharply, which together with significant declines in Michigan, New York & Minnesota offset a surge in Kentucky. Claims have been hemmed in a tight 183K-206K range this year & run consistently low despite high-profile layoffs in the technology sector & interest-rate sensitive industries, which economists & policymakers have argued were not representative of the overall economy. The claims, a proxy for hiring, dropped 37K to 1.654M last week, the claims report also showed. Though continuing claims remain elevated, they are below levels seen before the pandemic.
U.S. labor market resilient; inflation hotter in fourth quarter
After the bipartisan Congressional Budget Office (CBO) projected US national debt will continue to get worse, one of the industry's watchdog is signaling that its latest economic outlook is "chilling." Last week the Committee for a Responsible Budget noted that the CBO's latest Budget & Economic Outlook projected that the national debt is on track to exceed records by 2028 & top 118% of US gross domestic product (GDP) by 2023. "Hopefully this will get lawmakers to take seriously the negotiations that they're in the midst of on how to raise the debt ceiling," Committee for a Responsible Federal Budget Pres Maya MacGuineas said. "There should be no talk of default. It's really dangerous." The CBO's baseline budget forecast for the 2023-2033 period finds that the amount of debt held by the public will be $25.7T in 2023 & rise to $46.4T in 2033, an increase of $20.7T over the course of the next 10 years. As a percentage of forecasted GDP, debt held by the public would rise from 98% of GDP in 2023 to 118.2% of GDP in 2033. CBO Director Phillip Swagel noted that trajectory will continue in the ensuing decades based on current budgetary policies, pushing the federal to 195% of GDP in 2053. After 2023, the CBO also reported, growth of real GDP is projected to rise slightly, averaging 2.4% a year from 2024 to 2027 in response to declines in interest rates. "One thing we really learned is that in the coming five years, in the next presidential term, there will be some very serious and dangerous milestones that we will hit. Our debt as a share of GDP will be the highest it has ever been in the history of this country, and that includes right after World War II," MacGuineas explained. Another impact Americans will feel is Medicare's trust fund Part A running & becoming insolvent, the budget watchdog claimed, as well as interest payments rising in correlation to how much the US spends on defense. "That's how much interest payments, which are the fastest growing part of the budget, are going to be growing," MacGuineas said. "That will be the third-largest program in our entire budget, right after Social Security and Medicare." Over the next decade, MacGuineas argued America will spend more than $10T on interest payments alone. "Just a few years ago when interest rates were low, you had all sorts of economists clamoring, saying, 'Borrow more, borrow more. It's so cheap, it's almost free.' That wasn't true then, because when the government borrows money, it's saying you don't have to pay for it, someone down the road is going to pay for it," the committee pres noted.
Budget watchdog sounds alarm over US debt exceeding records in just 5 years: 'Chilling'
Gold futures posted their lowest year-to-date finish, a day after minutes of the Federal Reserve's latest policy meeting affirmed that policy makers expect to push rates higher & keep them there. Gold for Apr fell $14 (0.8%) to settle at $1826 an ounce. Prices were down a 4th straight session & marked the lowest settlement for a most-active contract since Dec 30. Minutes of the Fed’s Jan 31-Feb 1 policy meeting released yesterday affirmed that policy makers were solidly behind plans to continue raising rates, but offered no major surprises. The minutes confirmed what last week's strong inflation data already said that we're stuck with higher interest rates & a strong $ — a structural headwind for commodity markets.
Gold Ends at a Nearly 2-Month Low after Fed Minutes Feed Higher-for-Longer Rate Expectations
US oil futures prices notched their first gain in 7 sessions, finding support from a weekly decline in US gasoline inventories even as crude supplies rose for a 9th straight week. The Energy Information Administration reported a 1.9M-barrel fall in gasoline stocks for last week. That came on the back of a 2nd consecutive drop in gasoline imports & a nearly 700K barrel per day weekly rise in gasoline product supplied, a proxy for demand. Gasoline demand has clearly began its seasonally normal strengthening trend. US benchmark West Texas Intermediate crude for Apr rose $1.44 (2%) to settle at $75.39 a barrel.
U.S. oil futures mark first gain in 7 sessions
Bargain hunters returned in the PM to give the stock market a lift. However, nothing is new. Recession fears have not gone away. Higher interest rates are coming & will be a drag on the economy.Dow Jones Industrials
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