Dow sold off 110, decliners over advancers better than 2-1 & NAZ slumped 97. The MLP index was off 1+ the 223s & the REIT index fell 5+ to the 368s. Junk bond funds fluctuated & Treasuries had more buying, reducing yields. Oil was off 1+ to the low 77s & gold rose 10 to 2017 (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)
US existing home sales resumed their downward spiral in Mar as a sharp jump in mortgage rates cooled consumer demand. Sales of previously owned homes tumbled 2.4% in Mar from the prior month to an annual rate of 4.4M units, according to the National Association of Realtors (NAR). On an annual basis, existing home sales are down 22% when compared with Mar 2022. "Home sales are trying to recover and are highly sensitive to changes in mortgage rates," said Lawrence Yun, NAR chief economist. "Yet, at the same time, multiple offers on starter homes are quite common, implying more supply is needed to fully satisfy demand. It’s a unique housing market." The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign. Policymakers already lifted the benchmark federal funds rate nine consecutive times & have signaled that a 10th increase is on the table at their May meeting amid signs of underlying inflationary pressures within the economy. For months, higher mortgage rates have dampened consumer demand & brought down home prices. As rates have slowly fallen from a peak of 7%, the housing market has shown early signs of stirring back to life. Limited inventory has also bolstered demand & prices this month. A recent report from Realtor.com showed that the number of available homes on the market in Mar is down more than 50% from the typical number before the pandemic began.
Existing home sales unexpectedly fall, reversing recent gains
The US economy is almost certainly careening toward a recession that will have a years-long impact, according to the Federal Reserve's own staff. Minutes from the Fed's Mar meeting released last week indicate that its forecasters believe a minor downturn is imminent after recent turmoil within the banking system – even as the central bank's top policymakers deny such an outcome. "Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years," the minutes said. However, even a "mild" recession could have severe implications for the economy & the stock market. JPMorgan strategists said in a note this week that even a modest downturn could cause stocks to crater by about 15%. "Even a mild recession would warrant retesting the previous lows and result in 15%+ downside," they said in the note. The gloomy forecast comes after a brutal year for the stock market, its worst since the 2008 financial crisis. All 3 indices tumbled in 2022, snapping a 3-year win streak. The Dow Jones Industrial Average ended the year down 8.8%, the best of the 3. The S&P 500 sank 19.4% while the tech-heavy Nasdaq Composite plunged 33.1%.
Why the Fed says a mild recession is in the cards this year
US seeks healthy economic competition with China even as the country pursues intellectual property to gain an economic edge, Treasury Secretary Janet Yellen said. Yellen stressed the importance of fairness between the US & China, while outlining a 3-tiered approach to strengthen a roughly $700B trade relationship, Yellen said. She also announced a planned visit to China “at the appropriate time.” Her comments come as Congress, & the Rep-held House in particular, increase pressure on Beijing as part of a sustained US backlash against China's economic tactics. China has pivoted away from market reforms “toward a more state-driven approach that has undercut its neighbors and countries across the world,” Yellen said. “This has come as China is striking a more confrontational posture toward the United States and our allies and partners – not only in the Indo-Pacific but also in Europe and other regions.” The world's 2 largest economies can only compete thru impartial rulemaking. “There is a world in which, as companies in the U.S. and China challenge each other, our economies can grow, standards of living can rise, and new innovations can bear fruit,” Yellen added. “But this type of healthy competition is only sustainable if it is fair to both sides.” The Treasury chief said the US trades more with China than “with any countries other than Canada and Mexico.” “American firms have extensive operations in China. Hundreds of Chinese firms are listed on our stock exchanges, which are part of the deepest and most liquid capital markets in the world,” Yellen said. But she contended China has pursued market share for its domestic firms through illegal means & at the expense of foreign competitors. “It has done so in traditional industrial sectors as well as emerging technologies,” Yellen said of the Chinese gov's efforts. “This strategy has been coupled with aggressive efforts to acquire new technological know-how and intellectual property – including through IP theft and other illicit means.” The Biden administration's 3-pronged proposal to develop economic rapport with China emphasizes national security & human rights protections. “We will clearly communicate to [China] our concerns about its behavior. And we will not hesitate to defend our vital interests,” Yellen continued. “Even as our targeted actions may have economic impacts, they are motivated solely by our concerns about our security and values. Our goal is not to use these tools to gain competitive economic advantage.”
Yellen says U.S. economic competition with China must be ‘fair to both sides’
Gold prices rose as investors moved away from the $ & bid up treasuries. Gold for Jun closed up $11 to settle at $2019 per ounce. The rise comes as the $ weakens, making the metal more affordable for intl buyers. The ICE dollar index was last seen down 0.16 points to 101.81. Bond yields were also weaker as investors move to the safety of treasuries, pushing up prices & lowering yields, bullish for gold since the metal offers no interest. The yield on the 2-year note was last seen down 7.2 basis points to 4.174%, while the 10-year note was paying 3.545%, down 4.7 basis points. The cheaper the $, the more $s it takes to buy commodities priced in $s, & the lower interest rates, the less competition Gold has as the safe haven of choice for traders trying to preserve capital.
Gold Price Firms as the Dollar Weakens and Bond Yields Drop
Oil futures fell, with US benchmark prices settling at their lowest in almost 3 weeks, pressured by ongoing worries about a recession that could lead to a decline in energy demand. May West Texas Intermediate crude declined by $1.87 (2.4%) to settle at $77.29 a barrel, with prices for the front-month contract, which expired at the day's finish, settle at their lowest since Mar 31. The new front-month contract, Jun finished at $77.37, down $1.87 (2.4%).
U.S. oil prices settle at a nearly 3-week low
Stocks had another difficult day. The earnings report from Tesla (TSLA), down 10% today, was a significant headwind for stocks. However headwinds from the overall economy make it difficult for bulls to establish their case on buying stocks. As has been the case for months (see below), Dow has been stuck in the mud for months. Meanwhile safe haven gold remains near record highs.
Dow Jones Industrials
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