Dow went up 91 , advancers over decliners 2-1 & NAZ pulled back 171. The MLP index gained 3+ to the 229s & the REIT index advanced 6+ to the 373s. Junk bond funds were mixed & Treasuries saw heavy selling, raising yields. Oil was in demand, going over 72, & gold dropped 23 to 1957 (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)
Given the overall environment in the industry, it’s likely for some smaller banks to consolidate, Treasury Secretary Janet Yellen said. “There is motivation to see some consolidation and it wouldn’t surprise me to see some of that going forward,” Yellen added. Yellen said she wouldn't want to see the diverse banking system threatened by further consolidation, but it would be understandable given the pressure on earnings some banks are experiencing. The Treasury secretary also said she expects there to “be issues” in the commercial real estate sector given the changing approach to work. “We’ve seen such a big change in attitudes and behaviors toward remote work,” Yellen said. “And especially in an environment of higher interest rates. I think banks are broadly preparing for some restructuring and difficulties going ahead.” Yellen added that stress tests of the largest banks showed they have enough funds to handle any upsets. “My overall read is that the level of capital and liquidity in the banking system is strong and while there will be some pain associated with this, the banks should be able to handle the strain.”
Yellen says she wouldn’t be surprised to see more bank consolidation
A key measure of home-purchase applications fell again last week as consumer demand cooled in the face of higher mortgage rates. The Mortgage Bankers Association's (MBA) index of mortgage applications dropped 1.4%, according to new data. "Mortgage rates declined last week from a recent high, but total application activity slipped for the fourth straight week," said Joel Kan, MBA's deputy chief economist. "Purchase activity is constrained by reduced purchasing power from higher rates and the ongoing lack of for-sale inventory in the market." Demand for refinancing also continued to fall last week, sliding another 1%, according to the survey. Compared with the same time last year, refinance applications are down 42%. "There continues to be very little rate incentive for refinance borrowers," Kan said. The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign. 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. However, the return to lower mortgage rates has not been smooth. Rates have moved significantly higher over the past month, according to Mortgage News Daily, with the average rate on the popular 30-year mortgage hovering around 6.89% – near the highest level in 2 months. Those rates remain significantly higher than just one year ago, when rates hovered around 5%. 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.
Mortgage demand drops again as interest rates remain elevated
Millionaire investors are adding to their mountains of cash, betting on higher interest rates & weak stock markets in 2023, according to a CNBC Millionaire Survey. More than 1/3 of millionaire investors, 34%, report keeping more of their money in cash, according to the survey, which surveys households with $1M or more in investible assets. They now have 24% of their portfolio in cash, up substantially from the 14% they held in cash a year ago, according to the survey. Of the respondents, 28% said they have purchased more fixed income, as they expect interest rates to remain high. The results echo a recent survey by Capgemini that found global high-net-worth investors had a record 34% of their portfolios in cash or cash equivalents, such as money markets, CDs & other vehicles. “These investors are moving from growth to value, to protecting their assets,” said Elias Ghanem, global head of Capgemini Research Institute for Financial Services. “Right now, it’s better to be safe than sorry.” Wealthy investors are still cautious on the stock market, but not as bearish as they were at the start of the year. While 38% of millionaire investors say the S&P 500 will end the year down, a slightly larger portion, 40%, say the market will end the year higher. That market sentiment has brightened substantially since last year, when 69% of survey respondents expected to end 2023 down & only 22% expected markets to end higher. “They’re becoming more comfortable with the market volatility and the fact that markets keep going up despite all the reasons it should be going down,” said George Walper, pres of Spectrem Group, which conducts the Millionaire Survey with CNBC. “A lot of people are just confused as opposed to predicting further declines.” Millionaires are more bearish on the overall economy, however. A majority, at 60%, expect the economy to be “weaker” or “much weaker” at the end of 2023. One reason for their caution: inflation. Millionaire investors are still betting inflation will persist for years, potentially keeping interest rates higher for longer. More than ½ of millionaires say inflation will not fall to the Federal Reserve's 2% target for at least 2 years, with 11% saying it will last at least 5 years.
Millionaires are hoarding cash, betting on higher rates, CNBC survey says
Gold futures declined, settling at their lowest in more than a week, as investors awaited further clues on the Federal Reserve's interest rate path. Gold for Aug fell $23 (1.2%) to settle at $1958 an ounce after posting back-to-back session gains. Prices settled at their lowest since May 30. In the past week, gold prices basically remained within a trading range of about 2% from the lower to higher end of the trading range. The fact that the debt ceiling crisis was resolved without a default did deflate prices somewhat. The Federal Reserve is expected to hold its policy interest rate steady when policy makers meet next week. Fed-funds futures traders have priced in just a 22.9% probability of a qtr percentage point rate rise on Jun 14, but see a 65% chance rates will have risen by a ¼ or ½ a percentage point at its Jul 26 meeting.
Gold prices end at lowest level in more than a week as traders gauge Fed’s rate path
Oil futures settled higher, with US benchmark prices turning positive for the week after US gov data revealed a weekly decline in domestic crude supplies. Overall, oil has stalled this week as traders haven’t really bought into demand growth story. Today's Energy Information Administration report showing a massive buildup in gasoline & diesel inventory reaffirms demand fear, but the highly anticipated demand pickup has yet to arrive. Jul West Texas Intermediate crude rose 79¢ (1.1%) to settle at $72.53 a barrel, trading about 1.1% higher week to date & has been flat for the week.
U.S. Oil Futures Turn Higher for The Week
US stocks wavered after an unexpected interest rate hike from Canada, a surprise drop in Chinese exports & economic headwinds flagged by the OECD. Markets rose cautiously despite new doubts about global growth. However buyers took the Dow to a roughly 1 month high although NAZ slid back today.
Dow Jones Industrials
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