Dow dropped 130, decliners over advancers 3-2 & NAZ were off 91. The MLP index was little changed in the 224s & the REIT index declined 7 to the 375s on talk of higher interest rates. Junk bond funds inched higher & Treasuries sold off again, driving the yield on the 10 year Treasury over 4% (more below). Oil was steady in the 77s & gold recovered 9 to 1845 following recent selling.
AMJ (Alerian MLP Index tracking fund)
Mortgage rates moved higher again last week, pushing buyers back to the sidelines just as the spring housing market is supposed to be heating up. Mortgage applications to purchase a home dropped 6% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. Volume was 44% lower than the same week one year ago & is now sitting at a 28-year low. This as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) increased to 6.71% from 6.62%, with points rising to 0.77 from 0.75 (including the origination fee) for loans with a 20% down payment. That is the highest rate since Nov of last year. Mortgage rates have moved 50 basis points higher in just the past month. Last Feb, rates were in the 4% range. “Data on inflation, employment, and economic activity have signaled that inflation may not be cooling as quickly as anticipated, which continues to put upward pressure on rates,” said Joel Kan, an MBA economist. Applications to refinance a home loan fell 6% for the week & were 74% lower year over year. “Refinance applications account for less than a third of all applications and remained more than 70% behind last year’s pace, as a majority of homeowners are already locked into lower rates,” added Kan. Mortgage rates haven't done much to start this week, but the trajectory now appears to be higher, after a brief respite in Jan. Lower rates to start the year caused a brief surge in homebuying, but mortgage demand from homebuyers would seem to indicate a very slow spring is ahead.
Mortgage demand from homebuyers drops to a 28-year low
General Motors (GM) is making moves to cut costs & streamline operations. The plan means cutting hundreds of exec-level & salaried jobs, a person briefed on the matter said. The global reductions are in the "low hundreds," the person added. The
company is committed to $2B in cost savings in the next 2
years, according to a letter to employees from GM Chief People Officer
Arden Hoffman. The automaker said in Jan it did not plan layoffs & did not characterize the cuts as layoffs. GM
said the job action "follows our most recent performance
calibration and supports managing the attrition curve as part of our
overall structural costs reduction effort." The stock rose 34¢.
If you would like to learn more about GM, click on this link:
club.ino.com/trend/analysis/stock/GM_aid=CD3289&a_bid=6ae5b6f7
Major US automaker slashing hundreds of jobs to try to save $2B
Treasury yields rose as investors weighed the latest economic data & assessed the outlook for Federal Reserve policy. The benchmark 10-year Treasury yield was up by 8 basis points at 3.996%, reaching levels last seen in the first ½ of Nov. The yield on the 2-year Treasury was last trading at 4.891% after rising by over 9 basis points. The 1-year yield climbed almost 8 basis points to over 5%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. Minneapolis Federal Reserve Pres Neel Kashkari said that he’s “open to the possibility” of a larger interest rate increase at this month's policy meeting, “whether it’s 25 or 50 basis points,” but hasn't made up his mind yet. Manufacturing remained in contraction during Feb as production & new orders slowed, the Institute for Supply Management reported. The closely watched ISM Manufacturing Index registered a 47.7% reading, representing the percentage of companies reporting expansion. A reading below 50% represents contraction. The forecast had been looking for a headline reading of 47.8%.
Treasury yields climb as investors weigh economic data, Fed policy outlook
Higher yields & the threat of more increases are driving selling in the stock market. The current yield on the 10 year Treasury was last seen in 2007 (which was followed by a major recession).Dow Jones Industrials
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