Dow was off 27, advancers slightly ahead of decliners & NAZ declined 65. The MLP index stayed in the 225s & the REIT index eased up 1+ to the 374s. Junk bond funds were trading higher & Treasuries saw limited buying. Oil rose 1+ to the 82s & gold added 4 to 2023.
AMJ (Alerian MLP Index tracking fund)
Inflation showed welcome signs of cooling in Mar as the cost of
gasoline declined, but core prices pointed to strong underlying price
pressures that are still bubbling beneath the surface. The Labor
Dept said that the consumer price index, a broad measure
of the price for everyday goods including gasoline, groceries &
rents, rose 0.1% in Mar from the previous month, down from 0.4% in
Feb. Prices climbed 5% on an annual basis, down sharply from
Feb's 6% increase & the smallest rise in nearly 2 years. Those figures were both lower than the forecasts. Still,
inflation remains about 3 times higher than the pre-pandemic
average, underscoring the persistent financial burden placed on Ms
of US. households by high prices. Other parts of the report also pointed to a slow retreat for inflation, a worrisome sign for the Federal Reserve.
Core prices, which exclude the more volatile measurements of food &
energy, climbed 0.4%, or 5.6% annually. That is up slightly from
Feb's 5.5% increase, snapping a 5-month-long streak of declines. The report is the last before the Fed's next policy-setting meeting on May 2-3 & will have major implications
for the central bank, which is tightening monetary policy at the
fastest rate in decades as it tries to crush out-of-control inflation.
Inflation rises again in March, but less than expected
Today's housing market is so pricey that homebuyers are highly sensitive to any distinct moves in mortgage rates. And that’s what happened last week. Rates dropped & buyers dove in. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) decreased to 6.30% from 6.40%, with points decreasing to 0.55 from 0.59, including the origination fee, for loans with a 20% down payment, according to the Mortgage Bankers Association. That was a weekly average decline, but a sharper, one-day drop smack in the middle of the week was likely the impetus for demand. “Incoming data last week showed that the job market is beginning to slow, which led to the 30-year fixed rate decreasing to 6.30% — the lowest level in two months,” said Mike Fratantoni, MBA's SVP & chief economist. Mortgage applications to purchase a home rose 8% last week, compared with the previous week. They were, however, 31% lower than the same week one year ago, when interest rates were significantly lower. Buyers have been up against not only higher rates & higher home prices, but very limited supply. Applications to refinance a home loan were less reactive, basically flat week to week & 57% lower than the same week a year ago. At today's interest rates, there are very few borrowers who can benefit from a refinance. For those looking to tap their home equity, they are largely opting for 2nd loans rather than cash-out refinances.
Homebuyer mortgage demand jumps after interest rates drop to two-month low
Warren Buffett said Americans should not be concerned about their bank deposits in the wake of the latest financial shock in the sector & the gov would ensure no depositor in this country lost a dime. “People shouldn’t be worried about losing the money and the deposits they have in an American bank, and today, they have no reason to worry,” said the Berkshire Hathaway (BRK.B) CEO. “But the message has gotten very confused and people don’t really understand how it all works.” The banking sector went thru a brief panic in Mar as depositors fled Silicon Valley Bank, which had mismanaged its bond portfolio & was overly leveraged to the tech industry. Fear grew that depositors with more than the $250K FDIC insurance limit would lose their money. But over the weekend on Mar 12, the gov backstopped all depositors in SVB, along with those in Signature Bank, no matter the amount they had with the banks. Buffett said the gov would likely step in to backstop all depositors in all US banks if that was ever necessary, though he did note that would require Congressional approval. “We’ll get the OK,” he said when asked if Congress would approve that extraordinary action. Buffett noted that Congress would also adjust the debt ceiling for this to take place in order to avoid financial ruin for the country. The banks closures have set off a crisis of confidence among investors & customers as they questioned whether other financial institutions could face the same fate. Bank stocks largely tumbled in Mar as investors grew skittish on the sector, with the selloff specifically focused on regional banks amid liquidity concerns. To restore confidence, 11 banks put $30B in deposits in First Republic Bank, whose shares have tumbled during the shock. Buffett noted that shareholders may lose out if more bank failures occur & rightly so, but depositors shouldn't be worried.
Buffett says U.S. bank deposits are safe and the government would backstop all of them if necessary
The inflation news was not a great surprise. After reviewing the report, worries about efffects of high interest rates on the economy linger. Overall, the econmy continues to stumble & recession fears have not gone away.Dow Jones Industrials
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