Tuesday, August 22, 2023

Markets drift lower on more banking downgrades by S&P Global

Dow lost 123, decliners slightly over advancers & NAZ was up 58.  The MLP index is holding in the 237s & the REIT index was about even in the 355s.  Junk bond funds were mixed & Treasuries had limited buying which reduced yields slightly.  Oil slipped lower but held about 80 & gold hardly budged at 1922.

AMJ (Alerian MLP Index tracking fund)


 

 




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S&P Global cut credit ratings & revised its outlook for multiple US banks, following a similar move by Moody's, warning that funding risks & weaker profitability will likely test the sector's credit strength.  A sharp rise in interest rates is weighing on many US banks' funding & liquidity, S&P said in a summarized note, adding that deposits held by Federal Deposit Insurance Corp-insured banks will continue to decline as long as the Federal Reserve is “quantitatively tightening.”  Moody's had earlier this month cut the ratings of 10 banks by one notch & placed 6 banking giants on review for potential downgrades.  The collapse of Silicon Valley Bank & Signature Bank earlier this year sparked a crisis of confidence in the US banking sector, leading to a run on deposits at a host of regional banks, despite authorities launching emergency measures to shore up confidence.

S&P downgrades multiple U.S. banks citing ‘tough’ operating conditions

Sales of previously owned homes dropped 2.2% in Jul from Jun to a seasonally-adjusted, annualized rate of 4.07M units, according to the National Association of Realtors.  Sales were 16.6% lower compared with Jul of last year & homes sold at the slowest Jul pace since 2010.  This count is for closings, so contracts were likely signed in May & Jun, when mortgage rates went from 6.5% to well over 7%.  Sales fell month-to-month in all regions except the West, where they rose 2.7%.  Sales dropped the most in the Northeast, down 5.9%.  The National Association of Realtors is blaming higher rates & still tight supply for the decrease.  There were 1.11M homes for sale at the end of Jul, 14.6% fewer than Jul 2022 & about ½ of the pre-Covid supply.  At the current sales pace, that represents a 3.3-month supply.  A 6-month supply is considered balanced between buyer & seller.  Short supply continues to push both competition & prices higher.  The median price of a home sold in Jul was $406K, an increase of 1.9% from Jul of last year.  “The West is the most expensive region, but it’s also the region that experienced some price decline,” said Lawrence Yun, chief economist for the National Association of Realtors.  “Home shoppers have seen the number of options dwindle as homeowners are largely content to stay put and enjoy their current home, especially those with a low mortgage rate,” said Danielle Hale, chief economist at Realtor.com.  Sales fell across all price categories, but they fell the least in the highest price category: homes over $1M because there is much more supply on the high end, while the low end of the market is leanest.

The Food & Drug Administration approved a vaccine from Pfizer (PFE) that protects infants from respiratory syncytial virus, the leading cause of hospitalization among babies in the US.  Its RSV shot is already approved & available in the US for older adults.  It's now the 2>nd treatment approved by the FDA to prevent RSV in infants & the first vaccine.  It uses maternal immunization, which refers to vaccinating pregnant mothers so they can pass protective antibodies to their fetuses.  Pending a recommendation by the Centers for Disease Control & Prevention, PFE hopes the vaccine will be available to the public by the end of Oct or the beginning of Nov, which marks the beginning of RSV season, according to Alejandra Gurtman, the company's senior VP of clinical research & development for vaccines.  “When you think globally, this vaccine could potentially have a huge public health impact,” Gurtman said.  “After 50 years of trying to find a way where we can protect babies during the first three or especially six months of life, this vaccine is something I’m very proud of.”  Dr Peter Marks, the FDA's vaccine head, added in a release that the approval provides another option for health care providers and pregnant individuals to “protect infants from this potentially life-threatening disease.”  The shot would help the US. combat the upcoming RSV season as it comes off an unusually severe year.  Cases of the virus in children & older adults overwhelmed hospitals across the country, largely because the public stopped practicing Covid pandemic health measures that had helped contain the spread of RSV.  The stock fell 38¢.
If you would like to learn more about PFE, click on this link:
club.ino.com/trend/analysis/stock/PFE_aid=CD3289&a_bid=6aeoso5b6f7

FDA approves Pfizer maternal RSV vaccine for infants

High interest rates are squuzing banks because their portofolios of debt are declining, a consequence of higher interest rates.  The outlook for the stock market is gloomy.

Dow Jones Industrials

 






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