Dow dropped 234, decliners over advancers better than 3-1 & NAZ went down 134. The MLP index stayed in the 226s & the REIT index fell 4+ to the 353s. Junk bond funds fluctuated & Treasuries were essentially flat (more below). Oil rose 1+ to the 74s & gold was off 1 to 1972.
AMJ (Alerian MLP Index tracking fund)
Negotiations over raising the US debt limit resumed & the 2 sides were still miles apart with only 8 days left to pass a bill before the earliest date the US could face serious risk of default. Negotiators for House Reps & the White House were expected to resume talks in a conference room, where they have holed up for hours every day this week. But outside the room, concerns grew about whether negotiators would be able to reach a deal with Reps to cut gov spending in exchange for the GOP votes needed in the House to pass a bill that raises the debt ceiling before Jun 1. A Dem official said the talks have hit a “speed bump.” But after a week of daily sessions led by a group of veteran negotiators, people on both sides said today that the gap between what House Reps want & what the White House is willing to give seemed wider than ever. For example, one of the lead delegates for Reps, Rep. Patrick McHenry, laid bare last night what had up to that point only been implied, when a reporter asked him what concession Dems were getting as part of the talks, in order to win their votes in the House. “The debt ceiling,” he said. “That’s what they’re getting,” added Rep Garret Graves, another GOP negotiator. This view of the past week as one where Dems are forced to accept Rep demands, while Reps in return offer only the chance to avoid a catastrophic debt default, would doubtless anger Dems & decrease the odds of a deal. The GOP has pushed to cut spending as part of any deal to increase the debt ceiling, which on its own does not authorize new outlays.
Debt ceiling talks hit a snag over spending levels with eight days until default deadline
Higher interest rates are taking a toll on the major areas of the housing market. Overall interest in mortgages, refinancing & purchases all fell in the past week. Demand for mortgage applications declined by 4.6% compared with the prior week, according to the weekly survey from the Mortgage Banker's Association (MBA). "Mortgage applications declined almost 5% last week as borrowers remained sensitive to higher rates," said Joel Kan, MBA's VP & deputy chief economist. "The 30-year fixed rate increased to 6.69%, the highest level since March." The refinance index decreased 5% from the previous week. The purchase index decreased 4% from a week earlier. "Since rates have been so volatile and for-sale inventory still scarce, we have yet to see sustained growth in purchase applications," said Kan. "Refinance activity remains limited, with the refinance index falling to its lowest level in two months." New US home construction rebounded in Apr as limited inventory helped to jolt homebuyer demand, but the housing market remains in a slump. Housing starts climbed 2.2% last month to an annual rate of 1.4M units, according to new Commerce Department data. "Economic data released over the past week have also pointed to a still-resilient economy", added Kan. "The housing market received positive data on new residential construction – which is seen as a key solution to the lack of housing inventory." The MBA survey covers over 75% of all US retail residential mortgage applications & has been conducted weekly since 1990.
High rates, low inventory keep home buyers sidelined
The yield on the 2-year Treasury yield rose slightly as investors monitored debt ceiling talks & looked to economic data that could hint at the Federal Reserve's monetary policy plans. The yield on the 2-year Treasury was up about 2 basis points at 4.301%, while the 10-year Treasury was flat at 3.694%. Both briefly touched levels last seen since Mar yesterday. Yields & prices move in opposite directions & one basis point equals 0.01%. Investors considered continued debt ceiling negotiations, which appeared to signal little progress toward a resolution yesterday. The US risks defaulting on its debt as soon as Jun 1 if a deal is not struck, Treasury Secretary Janet Yellen reaffirmed earlier in the week. Various House Reps questioned the deadline yesterday, though House Speaker Kevin McCarthy reiterated that negotiators were working toward the date. Elsewhere, investors weighed the outlook for Fed interest rate policy. Minutes from the central bank's last rate-setting meeting are expected today & could provide fresh clues about whether the central bank will pause rate increases imminently, or whether rate cuts loom this year.
Treasury yields hold steady as investors follow debt ceiling negotiations, await key economic...
Negotiations on the debt ceiling drag with no end in sight. Meanwhile the increased uncertainty it brings on is a drag for the economy which has already been stumbling. Once again, it seems like the economy is in a recession.Dow Jones Industrials
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