Markets hesitate on fears of higher interest rates for longer

Dow finished down 58 (but off session lows), decliners over advancers about 5-4 & NAZ went up 45.  The MLP index fell 1+ to the 226s & the REIT index added 4+ to the 381s.  Junk bond funds were mixed & Treasuries fluctuated keeping yields little changed.  Oil remained weak, down 1+ to the 76s, & gold was essentially even at 1819 (more on both below).

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After dropping to a 28-year low the previous week, mortgage demand recovered slightly, even though interest rates marched higher.  Total mortgage application volume rose 7.4% last week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  This happened even as the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) increased to 6.79% from 6.71%, with points rising to 0.80 from 0.77 (including the origination fee) for loans with a 20% down payment.  That is the highest level since last Nov & 270 basis points higher than a year ago.  “Even with higher rates, there was an uptick in applications last week, but this was in comparison to two weeks of declines to very low levels, including a holiday week,” noted Joel Kan, an MBA economist.  Applications to refinance a home loan jumped 9% week to week but were 76% lower than the same week one year ago.  At last week's rate, there were barely 200K borrowers who could get monthly savings from a refinance, compared with well over 2M who could have benefited at the rate one year ago, according to calculations from Black Knight, a mortgage data & analytics firm.  Mortgage applications to purchase a home rose 7% for the week & were 42% lower than the same week one year ago.  There is more inventory on the market now compared with a year ago, but new listings are still weak, suggesting that what is for sale isn’t selling very quickly.  The jump in demand could just be the start of the traditionally busy spring market.  The share of adjustable-rate mortgage applications, however, rose last week, suggesting more buyers are stretching to afford today's still pricey housing market.  ARMs offer lower interest rates at higher risk.  Mortgage rates have moved even higher, crossing over 7%, according to a separate survey from Mortgage News Daily.  Federal Reserve Chair Jerome Powell told lawmakers that rate hikes could accelerate again.  That spooked investors & sent bond yields higher yesterday.  Mortgage rates loosely follow the yield on the 10-year Treasury.

Mortgage demand recovers slightly, despite rising interest rates

Billionaire investor, philanthropist & business leader Ken Langone called out the Federal Reserve under Pres Biden for not acting on raging inflation that's hurting average Americans most.  "Let me say this to you about Joe Biden, in my opinion, and I'm going to be very, very direct: he thinks he's the smartest guy in the room," Langone said.  "If that's the case, we're really in trouble, because the American people are a lot smarter than that."  Langone's comments come as Federal Reserve Chair Jerome Powell indicated on Capitol Hill that the central bank is prepared to raise rates higher than initially expected.  Markets also had a shaky open following the first day of Powell's testimony.  "The American people need to understand there's no pain, no gain. Maybe we're going to put 2 million people out of work, but I don't know any way around dealing with the problem of inflation and the tragedy of what comes with inflation," Langone said.  "The poor people, the little people, the people living from paycheck to paycheck," he continued, "they're the ones that get hurt the most."  Further assessing the macroeconomic picture, Langone called the Fed under Powell a "gang that can’t shoot straight," arguing they got a late start on the fight against inflation.  "Frankly, they act like the gang that can't shoot straight because we should keep raising rates until we break it. Now, it's going to be some pain," the billionaire added.

Home Depot founder schools Fed, Biden over the 'tragedy' that comes with inflation

American Airlines (AAL) is reportedly preparing to offer its pilots similar benefits recently announced by rival Delta Air Lines (DAL).  It was reported that AAL CEO Robert Isom told pilots that matching DAL's new offerings will result in a contract worth more than $7B for them thru increased pay rates & profit sharing.  Isom said the new deal would be a "game changer" for pilots flying for AAL.  To match DAL's deal, which went into effect last Thurs, Isom said AAL pilots would receive an average pay increase of 21% in the first year of the contract & total pay increases in the 4th year would be 40%.  Last Wed, DAL's 15K pilots approved of an agreement that would result in a 34% increase in pay raises over 4 years, ultimately costing the company around $7B.  The Atlanta-based carrier also offered a lump-sum one-time payment, reduced health insurance premiums & improvements in holiday pay, vacation, company contributions to 401 (k) & work rules.  The new contract is expected to be the benchmark for negotiations at rival carriers.  The stock rose 23¢.
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American Airlines reportedly prepared to increase pilot pay

US crude ends 1.2% lower at $76.66 as a 2nd straight day of testimony by Fed Chair Jerome Powell on Capitol Hill kept fears of recession & weak oil demand high on the minds of investors.  Crude prices can't shake off fears that the Fed is going to send the US economy into a bad recession.  WTI crude may be stuck between the mid-$70s & the low $80s until more is known about what type of recession the Fed will trigger.  Amid the bearish sentiment, investors mostly shrugged off today's bullish weekly EIA report that saw declines in US inventories of both crude & gasoline. 

Oil Prices Finish Lower on Recession Fears

Gold futures ended slightly lower on Federal Reserve Chair Jerome Powell's final day of testimony to Congress.  In testimony to the Senate Banking Committee yesterday Powell raised the possibility for a more aggressive pace of interest-rate hikes, leading to strength in the $.  Yesterday, the $ eased back, as Powell told the House Financial Services panel that the central bank has not made any decision on the size of a potential interest-rate hike later this month.  Gold for Apr fell $1 to settle at $1818 an ounce after a 1.9% loss yesterday.

Gold Treads Water after Second-Biggest Selloff of 2023

Powell's testimony did not warm the hearts of investors today.  Nobody knows where a period of higher interest rates will lead, making for nervous investors.  They are even holding back on buying safe haven gold.  However there was buying in the last hour of trading which trimmed the daily loss.

Dow Jones Industrials