Dow closed down 187, advancers over decliners 3-1 & NAZ was off 18. The MLP index rose 2+ to the 231s & the REIT index stayed in the 375s. Junk bond funds hardly budged & Treasuries had only limited selling keeping yields about even. Oil moved up 2 to the 73s & gold advanced 16 to 1931 (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)
Mortgage rates last week hit their highest level since the end of May, which in turn weighed on mortgage demand. Total mortgage application volume dropped 4.4% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. Demand is now at its lowest level in a month. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) increased to 6.85% from 6.75%, with points rising to 0.65 from 0.64 (including the origination fee) for loans with a 20% down payment. While that was the average rate for the week, a separate survey from Mortgage News Daily showed the rate crossed over 7% last Thurs & has remained above that mark since then, rising to 7.08% on Tues of this week. As a result, mortgage demand to purchase a home, which had been rising for 3 straight weeks, dropped 5% for the week & was 22% lower than the same week one year ago. “Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country,” wrote Joel Kan, MBA's deputy chief economist. “However, the average loan size for a purchase application declined to $423,500 – its lowest level since Jan 2023.” The drop in loan size, according to Kan, was likely driven by a in some high-price markets & more activity in some of the lower price tiers. Applications to refinance a home loan fell 4% for the week & were 30% lower than the same week one year ago. As the summer progresses, the annual comparison is likely to shrink. Last summer was when mortgage rates shot significantly higher for the first time since before the Covid pandemic & refinance demand consequently fell off its high cliff.
Mortgage demand drops to lowest level in a month, as interest rates rise
Treasury Secretary Janet Yellen
met with Chinese Premier Li Qiang in Beijing to discuss
economic collaboration, while also urging the country's 2nd in
command to not let recent frustration over US restrictions on processor chips disrupt mending relations. "After a round of wind and rain, we will definitely see more
rainbows" Li said. Yellen
said the US & Beijing have a duty to work together on matters
that impact the world & requested "regular channels of
communication." While Treasury Yellen will not meet with Chinese leader Xi Jinping,
other senior US officials are due to visit Beijing & encourage
Chinese leaders to renew economic interaction between the &
countries. In the interest of national security, Yellen defended
US actions to deter Chinese access to technologies like advanced
processor chips. She also criticized China's treatment of US companies
during a meeting with businesspeople. "You may disagree," Yellen said, "but we should not allow any
disagreement to lead to misunderstandings that needlessly worsen our
bilateral economic and financial relationships." Yellen also asked for "healthy economic competition" amid Beijing's
ramp up of subsidies & market barriers to protect its companies. "A
fair set of rules will benefit both of our countries," Yellen said. "We
also face important global challenges where the United States and China
have a duty to both countries but also to the world to cooperate." Meanwhile, Li said conditions between the US & China
might improve but did not outline any potential changes in Chinese
policies tweaking the US & its partners around the world.
Yellen urges communication in high-stakes meeting with Chinese Premier
Bankruptcy filings in the US jumped markedly in the first 6 months
of 2023 compared to the same period last year according to data released
this week by Epiq Bankruptcy. The firm reported commercial Chapter 11 "reorganization" bankruptcies surged 68%, with filings for small businesses
climbing by 55%. Chapter 13 filings that allow individuals to repay a
portion of their debts jumped by 23% in H1. "The
first six months of 2023 saw a nearly 70 percent increase of total
commercial Chapter 11 bankruptcies," said Gregg Morin, VP of
Business Development & Revenue at Epiq Bankruptcy. "This trend points
to the economic trials businesses are facing right now, which are
impacted by rising interest rates, inflation, and increased borrowing
costs, to name a few." Bankruptcy experts say myriad factors have contributed to the
increase in Americans & businesses being pushed to the point of
insolvency. "This
past year, rising inflation, higher interest rates and the conclusion
of government stimulus programs have put significant strain on U.S.
consumers," said Amy Quackenboss, exec director of the American
Bankruptcy Institute. Quackenboss noted consumer credit card debt
is at historically high levels as individuals & families struggle to
pay for the higher cost of necessary household goods & services. She said "some are facing foreclosure on their homes because
the cost of refinancing is prohibitive due to rising interest rates." Kevin Carey, ABI's immediate past pres, pointed to rising mortgage rates
as another possible contributing factor to the rise in bankruptcies. He
explained that Chapter 13 bankruptcies typically involve consumers who
have defaulted on their mortgage payments & are trying to stop the
foreclosure process by restructuring their debt with the lender.
US bankruptcy filings surge in first half of 2023 compared to last year
Gold prices rose off the lowest in nearly 4 months as the $ fell after the US added fewer jobs than expected in Jun, easing concerns the Federal Reserve will need to be even more hawkish to slow the economy to lower inflation. Gold for Aug closed up $17 to settle at $1932 per ounce. The US added 209K new jobs in Jun, under consensus expectations for a 240K-job rise. The lower than expected rise follows on ADP private-sector hiring data released yesterday that came in more at more than double the consensus forecast, boosting treasury yields & pushing the price of gold to the lowest since mid-Mar. The $ was sharply lower following the weak jobs data, which may ease pressure on the Fed to continue slowing the economy with rate hikes. The ICE dollar index was last seen down 0.92 point to 102.25. Treasury yields were mixed. The US 2-year note was last seen paying 4.952% down 4.9 basis points, while the yield on the 10-year note was up 0.8 basis points to 4.046%.
Gold Rises as a Weak US June Jobs Report Pushes the Dollar and Yields Lower
US oil futures finished higher, buoyed by a 3rd straight weekly decline in US crude inventories. Prices posted a 2nd successive advance. However with the tightness of the market, and the announcement of further output cuts this week, price's could have closed even higher. West Texas Intermediate crude for Aug rose $2.06 (2.9%) to settle at $73.86 a barrel. Based on the front-month contract, prices gained 4.6% for the week.
U.S. Oil Ends Higher for the Session, Tallies a Nearly 5% Weekly Gain
The news on jobs brought in sellers. At midday, the bulls managed a rally into the black, but that did not last & it closed at its lows. Dow is back below 34K as it has been for months (see below). The Dow finished down 670 for the week.
Dow Jones Industrials
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