Dow advanced 323, advancers over decliners better about 4-1 & NAZ gained 210. The MLP index went up 2+ to the 219s & the REIT index jumped 7+ to the 361s. Junk bond funds had limited buying & Treasuries hardly budged in price, leaving yields flattish for the day. Oil slid back to go under 75 & gold was off 4 to 1969 (more on both below).
AMJ (Alerian MLP Index tracking fund)
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Demand for mortgage applications climbed 2.9% from a week earlier, according to the weekly survey from the Mortgage Bankers Association. Mortgage rates have been moving lower since the collapse of Silicon Valley Bank triggered fears of a broader banking meltdown. "Application activity increased as mortgage rates declined for the third straight week," said Joel Kan, MBA’s VP & deputy chief economist. "The 30-year fixed rate declined to 6.45%, the lowest level in over a month." The decline in rates sparked interest among the other homebuying metrics. The refinance index increased 5% percent from the previous week. "Refinance activity also picked up last week, but remains 61 percent below last year’s pace", added Kan. "Most homeowners still have rates significantly lower than current levels, leaving only a small pool of borrowers with an incentive to refinance." The purchase index increased 2% from one week earlier. "While the 30-year fixed rate remained 1.65 percentage points higher than a year ago, homebuyers responded, leading to a fourth straight increase in purchase applications," said Kan. "Homeprice growth has slowed markedly in many parts of the country, which has helped to improve buyers' purchasing power." The average contract interest rate for 30-year fixed mortgages decreased to 6.45% from 6.48%. The survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990.
Lower mortgage rates juices homebuyers
House lawmakers tore into top US bank regulators, questioning their competency & saying examiners were asleep at the wheel, at a 2nd day of congressional hearings this week about how Silicon Valley Bank & Signature Bank collapsed practically overnight on Mar 10 & 12. “We need competent financial supervisors, but Congress can’t legislate competence,” House Financial Services chair Rep Patrick McHenry told top officials at the Federal Reserve, Treasury & FDIC at the beginning the hearing. The committee's ranking member, Rep Maxine Waters questioned whether the repeated warnings regulators delivered to SVB about its balance sheet & long-term interest risks were sufficient. “The light touch cautions from the Fed to SVB management are clearly not what Congress intended for bank supervision,” said Waters. Rep Juan Vargas put it more bluntly. “It seems like [SVB] blew you guys off, and you didn’t do anything.” Federal Reserve Vice Chair Michael Barr did not disagree with this assessment. “I expect that we’re going to find that we need to have a more of an emphasis on supervisors using the tools they have more promptly, and putting in mitigations in place more promptly when they see problems at banks that they’re supervising,” he said. McHenry slammed the panel for a lack of transparency over that fateful weekend when the 3 regulators hastily arranged backup financing to ensure depositors at the 2 banks wouldn't lose any money in their collapse. There are no notes publicly available from regulators' emergency meetings the weekend the banks collapsed, McHenry said. “That lack of transparency has a negative effect on the public view of the safety of the financial arena,” he added. The question of what records would be given to Congress came up repeatedly in the contentious hearing. Rep Brad Sherman requested a broad survey of banks that are undercapitalized the same way SVB was. “Are there any banks out there, and roughly how many, that have capital of under 5% if you subtract from their stated capital their unhedged, unrealized losses on long term debt?” Sherman asked. “Let us get back to you on that,” said Martin Gruenberg, chair of the FDIC. “We’ll get the numbers and share them with you very quickly.” Rep Bill Huizenga demanded raw, confidential supervisory information about the banks, available to regulators ahead of the collapses. Gruenberg did not agree explicitly to provide confidential information, instead suggesting the committee would need to issue a subpoena for this information. “I think you have the authority to compel that information,” he said, “and [FDIC] will be responsive to you.” Members of the Rep majority House challenged many of the decisions made by regulators in the hours & days after SVB collapsed & Signature Bank followed 48 hours later. Chief among these was what regulators did, or didn't do, in the 3 days from the time they each learned of SVB's looming collapse, on Thurs-Sun, when they decided that the failures of SVB & Signature Bank posed a systemic risk to the financial system. “Despite U.S. regulators having clear knowledge of insufficient risk management, it seems the examiners and your supervisors were asleep at the wheel while signs that Silicon Valley Bank was heading towards a collapse were staring them right in the face for many, many months,” Rep Ann Wagner said to Barr.
House lawmakers tear into top bank regulators at hearing on SVB collapse
The fallout from a spate of bank failures is rippling throughout the economy, threatening to ignite a credit crunch that could hit small business the hardest. The Federal Reserve & financial economists are warning that lending standards may become drastically more restrictive in coming months amid ongoing turmoil within the financial system sparked by the stunning implosion of Silicon Valley Bank & Signature Bank. During a credit crunch, banks significantly raise their lending standards, making it difficult for businesses or households to get loans. Borrowers may have to agree to more stringent terms like high interest rates as banks try to reduce the financial risk on their end. Small businesses are particularly vulnerable to tighter credit conditions, particularly with regional banks at the epicenter of the crisis. Businesses with fewer than 99 employees tend to make up the bulk of business customers at regional banks, community banks & credit unions. Banks were already tightening lending standards before the crisis within the industry began. A quarterly survey of loan officers published by the Fed showed that a growing number of banks tightened lending standards & saw reduced demand in the final 3 months of 2022. That's because Fed officials are in the midst of the most aggressive tightening campaign since the 1980s as they try to crush inflation still running about 3 times higher than the pre-pandemic average. But fears over a broader financial crisis complicated the Fed's efforts because the rapid rise in interest rates played a direct role in the failure of Silicon Valley Bank. Increasing interest rates threaten to exacerbate instability within the financial system. Chair Jerome Powell acknowledged during the Fed's meeting last week that upheaval within the financial sector could tighten credit for American households. He suggested that stricter lending standards could have a similar effect on inflation that a rate increase can. "Such a tightening in financial conditions would work in the same direction as rate tightening," Powell said. "You can think of it as being the equivalent of a rate hike or perhaps more than that."
How the banking crisis could hammer small businesses
Gold futures ended with a loss, their 3rd in 4 sessions. Traders looked to book profits as gold futures failed to trade over the
$1990 resistance level. However, sentiment is very bullish for gold. Traders are worried over the prospects of more banks getting a
rescue & focused on the chances for a recession & a pause period
in Federal Reserve interest-rate hikes.
Gold for Jun fell $5 to settle at $1984 an
ounce.
Gold Futures Mark a Third Loss in 4 Session
Oil futures briefly traded higher after the Energy Information Administration reported the biggest weekly decline in US crude supplies so far this year, but prices finished slightly lower for the session. The big jump in refinery runs reported by the EIA caused some traders to adjust the crack spread & the adjustments likely led some traders to lighten up their positions in oil. Meanwhile, the market is still apprehensive because the banking crisis & liquidity is still a bit sketchy. May West Texas Intermediate crude fell 23¢ to settle at $72.97 a barrel.
Oil Futures Give Up Gains to Finish with a Modest Loss
Since its recent low on Mar 10, Dow has recovered 900 with modest daily gains. Considering the background of the banking mess, that is a fairly good response. However it is still below its yearly high & the record set at the start of last year. The effects of substantially higher interest rates & a looming recession are limiting any stock market advance.
Dow Jones Industrials
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