Dow rose 149, advancers over decliners about 4-1 & NAZ went up 113 following recent declines. The MLP index added 1+ to the 218s & the REIT index rose 4+ to the 357s. Junk bond funds were being purchased & Treasuries saw a little selling & yields were slightly higher. Oil gained fractionally in the 73s & gold was off 1 to 1971.
AMJ (Alerian MLP Index tracking fund)
Higher mortgage rates took some of the juice out of the housing recovery in Feb. After a sharp gain in Jan, pending home sales rose just 0.8% month to month, according to the National Association of Realtors. Sales were 21.1% lower than Feb last year. Pending sales are based on signed contracts during the month. Mortgage rates shot higher in Feb after dropping sharply in Jan. The average rate on the popular 30-year fixed mortgage started Feb right around 6% ended the month just over 7%, according to Mortgage News Daily. That gave homebuyers considerably less purchasing power. Regionally sales moved higher month to month in every region except the West, where they fell 2.4%. That is likely because the West is the priciest region for housing & buyers there are thus stretching the most to afford a home. Any jump in mortgage rates would have an outsized effect there. “The affordable U.S. regions, the Midwest & South, are leading the recovery,” Yun said. “Mortgage rates have improved in recent weeks after the federal government guaranteed the status of most mortgages amidst uncertainty in the financial market,” Lawrence Yun, chief economist for the Realtors, added. “While access to commercial mortgage loans could become increasingly difficult, residential mortgage loans are expected to be more readily available.” Home prices have eased considerably since last summer, but housing is still expensive by historical standards. Price drops may also have stalled in Jan, due to the big jump in buyer demand. Real estate agents anecdotally reported more bidding wars in Jan, given still very short supply.
US consumers were more confident in Mar despite a string of banking failures & the Federal Reserve raising interest rates once again to cool persistent inflationary pressures. A survey from the Conference Board showed the Consumer Confidence Index went up slightly in Mar, rising to 104.2 from 103.4 in Feb. Meanwhile, the Present Situation Index, a gauge based on consumers' assessment of current business & labor market conditions, slipped to 151.1 from 153 last month, while the Expectations Index, a measurement of consumers’ short-term outlook for income, business & labor market condition, jumped to 73 from 70.4 in Feb. Ataman Ozyildirim, senior director of Economics at The Conference Board, said, "The uptick in consumer confidence reflects an improved outlook for consumers under 55 years of age and for households earning $50,000 and over." "While consumers feel a bit more confident about what’s ahead, they are slightly less optimistic about the current landscape," he added. "The share of consumers saying jobs are ‘plentiful’ fell, while the share of those saying jobs are ‘not so plentiful’ rose." "The latest results also reveal that their expectations of inflation over the next 12 months remains elevated — at 6.3%," while "overall purchasing plans for appliances continued to soften while automobile purchases increased slightly," Ozyildirim finished. This Mar, the Federal Reserve announced another 25-basis point interest rate increase, Silicon Valley Bank (SVB) & Signature Bank collapsed, erasing Bs of market value in financial stocks, while First Republic Bank struggles to stay in business even after a $30B lifeline from other financial institutions.
Consumers in America feeling more confident as interest rates rise
The US surpassed Russia as the top oil supplier to Europe at the end of last year as sanctions targeting Russia’s energy sector took hold. In Dec 2022, the US exported nearly 34.5M barrels of oil to the EU, accounting for about 18% of the EU's total imports, according to EU data from Eurostat. That represents a 6% increase in US oil imported by the EU compared to the last qtr of 2021. Russia had previously provided as much as 1/3 of all the EU's oil imports before it faced sanctions stemming from its invasion of Ukraine. US exports of crude oil had been on the rise prior to Russia's invasion of Ukraine, but the sanctions imposed on Russia's energy sector compelled European buyers to find alternative sources, opening the door to the shift. In Feb 2022, the month Russia launched its invasion of Ukraine, the EU imported about 63.9M barrels of oil from Russia, which represented 33% of total imports. That share declined in the ensuing months as European countries & the EU looked to find alternative energy sources to replace Russian supplies. By May 2022, the EU's oil imports from Russia declined to about 24.2M barrels & accounted for about 12% of EU oil imports. Russian oil imports to the EU remained relatively stable around that level until Sep 2022, when imports began to decline. As of Dec 2022, Russian oil imports had fallen to 7.6M barrels, representing about 4% of the EU's total oil imports & less than ¼ the amount imported from US sources. It's likely that the EU's imports of Russian oil will continue to decline given that the 6th package of EU sanctions, which was adopted in Jun & took effect Dec 5, included a ban on Russian crude oil transported by sea. The US wasn't the only country from which the EU ramped up oil imports as restrictions on Russian energy mounted. Crude oil imports from Norway rose to nearly 32.9M barrels in Dec, accounting for 17% of the EU's oil imports, an increase of 7% relative to Q4-2021.
US surpasses Russia as Europe’s top supplier of crude oil
Fears about a banking crisis are easing which is encouraging brave investors to buy stocks. However fundamental problems have not evaporated. Some of the stories about how banks were handling loans are not pretty which will probably lead to more regulation. The Dow chart belows shows it has been climbing higher for over 2 weeks.
Dow Jones Industrials
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