Dow fell 100, decliners over advancers about 5-2 & NAZ added 14. The MLP index was off 1 to the 229s & the REIT index rose 2+ to 380. Junk bond funds hardly budged & Treasuries saw some selling which raised yields (more below). Oil went up 1+ to the 71s (more below) & gold slid back 1 to 1927.
AMJ (Alerian MLP Index tracking fund)
The US housing market is defying expectations of a crash this year as limited inventory & high demand keep prices high. Fannie Mae economists predicted in a revised forecast that home prices will fall at a slower rate than previously anticipated later this year. The gov-backed mortgage giant estimated that home prices will only decline by 1.2% in 2023 & 2.2% the following year – a marked improvement from Feb, when it predicted that prices would tumble 4.2% this year & another 2.3% in 2023. "Current housing market dynamics continue to be fueled by the lack of existing homes available for sale, a trend that did not improve during the spring homebuying season, when more homes are typically put on the market," the economists wrote. "This has supported a return to home price growth in recent months and continued to boost new home construction." Although the Federal Reserve's 15-month-long interest-rate hike campaign sent mortgage rates soaring above 7% for the first time in nearly 2 decades, home prices have hardly budged. That is at least in part due to a lack of available homes for sale. Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers. A recent report from Realtor.com showed that the number of available homes on the market in Jun was down more than 47% from the typical amount before the COVID-19 pandemic began in early 2020. "Housing prices continue to show stronger growth than what was previously expected given the suddenness and significant magnitude of mortgage rate increases," said Fannie Mae chief economist Doug Duncan. "Housing's performance is a testimony to the strength of demographic-related demand in the face of Baby Boomers aging in place and Gen-Xers locking in historically low rates, both of which have helped keep housing supply at historically low levels." With limited availability, more buyers are turning to new houses instead of existing ones. "Homebuilders continue to add to that supply, but years of meager homebuilding over the past business cycle means the imbalance will likely continue for some time," Duncan added.
US housing market defying crash expectations as prices soar
The CEO of Saudi Arabian oil giant Aramco attributed the ongoing depression of oil prices to recessionary fears & economic headwinds, painting a more optimistic landscape for demand to come. “This is in a year where there [are] economic headwinds, where there [are] recessionary signs everywhere ... China’s still picking up,” Aramco's Amin Nasser said at a conference of the Organization for Petroleum Exporting Countries. Global crude oil prices have stayed tightly rage-bound just above the $75-per-barrel threshold despite a spate of additional voluntary cuts that some OPEC members are implementing until the end of 2024. On Mon, heavyweights Saudi Arabia & Russia, who lead the group of OPEC countries & its allies (OPEC+) crowed this effort with pledges for additional declines. Riyadh intends to extend a 1-M-barrel-per-day voluntary cut initially declared for Jul into Aug, while Moscow has committed to lower its exports by 500K barrels per day next month. Yet prices for Brent futures with Sep expiry were just $76.76 per barrel today, up by 51¢ per barrel from the previous settlement. Nasser signaled that the demand picture is likely to improve, stressing the potential of China, the world's largest importer of crude oil. “When things picks up, and [the] economy starts improving, China starts picking up, jet fuel picks up ... we are optimistic about the future,” he said, noting that the demand for the jet fuel supplies that are integral to the aviation sector remain below levels experienced before the onset of the Covid-19 pandemic. He did not specify a timeline for this demand recovery, but Paris-based energy watchdog the Intl Energy Agency in May flagged “tighter market balances we anticipate in the second half of the year, when demand is expected to eclipse supply by almost 2 mb/d.” Market watchers have been on the particular lookout for demand improvements from China, whose consumption was limited by zero-Covid measures before beginning to resurge since the start of the year. “We are making bigger investments. Our guidance is $45 to $55 billion for this year, that’s growing in leaps. So that shows our confidence in the future,” Nasser said, referencing Aramco's capital expenditure for 2023.
Aramco chief blames recessionary signals for low oil price
The 2-year Treasury yield inched down as markets reopened after the Fourth of July holiday & investors looked ahead to the release of the Federal Reserve's latest meeting minutes. The yield on the 2-year Treasury was last trading 2 basis points lower at 4.917% & the benchmark 10-year Treasury rose by 2 basis points to 3.88%. Yields & prices move in opposite directions & one basis point equals 0.01%. Since the last Fed meeting, policymakers including central bank chief Jerome Powell have repeatedly indicated that further interest rate hikes will likely be needed to bring inflation down & cool the economy. Powell has also suggested that rate increases could be announced at a pace that is faster than previously anticipated. This comes after the central bankers kept rates unchanged at their Jun meeting, noting that the pause allowed officials to consider fresh data & the impact of previous rate hikes. According to CME Group’s FedWatch tool, traders are currently pricing in a 86.2% chance of the Fed hiking rates again at its Jul meeting.
2-year Treasury yield dips as investors eye Fed meeting minutes
Dow Jones Industrials
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