Dow was off 26, advancers slightly ahead of decliners & NAZ dropped 118. The MLP index went up 1+ to the 237s & the REIT index added 1+ to the 373s. Junk bond funds crawled higher & Treasuries had limited buying which slightly reduced yields (more below). Oil added 1+ to the 84s & gold slid back 7 to 1952.
AMJ (Alerian MLP Index tracking fund)
Mortgage interest rates soared across the board last week, with the rate on the gov's low down payment option increasing to the highest level in 21 years. That hit mortgage demand hard, with total application volume dropping 3.1% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) increased to 7.09% from 6.93%, with points rising to 0.70 from 0.68 (including the origination fee) for loans with a 20% down payment. The average rate for jumbo loans hit 7.04%. The rate on Federal Housing Administration loans, which are favored by first-time or lower-income borrowers because they offer low down payments, hit 7.02%, the highest since 2002. “Treasury yields rates rose last week and mortgage rates followed suit, due to a combination of the Treasury’s funding announcement and the downgrading of the U.S. government debt rating,” said Joel Kan, VP & deputy chief economist at MBA. Applications for a mortgage to purchase a home dropped 3% for the week & were 27% lower than the same week one year ago. High mortgage rates are not only making it harder to afford a home, they're keeping current homeowners in place. Today's homeowners who have mortgages are paying interest rates of 3-4% & are putting off a move because they don't want to pay twice that on another home.
Mortgage demand drops again after FHA loan interest rate hits 21-year high
Treasury yields were flat, as investors prepared for key inflation data later this week & digested diverging commentary from Federal Reserve officials on the path of rates. The yield on the 10-year Treasury was down by less than 1 basis point at 4.016% & the 2-year Treasury was steady at 4.758%. Yields & prices have an inverted relationship & 1 basis point equals to 0.01%. Market participants will closely watch the consumer price index tomorrow & the producer price index (CPI) on Fri for signs of persisting inflation. The CPI print is expected to show a 0.2% increase in Jul, but the Cleveland Federal Reserve’s Inflation Nowcast model suggests a 0.4% rise. Philadelphia Fed Pres Patrick Harker said yesterday that the current hiking cycle may have come to an end. But Federal Reserve Bank Governor Michelle Bowman on Mon said she believes rates have further ground to climb to bring inflation to target. The Fed will hold 3 more monetary policy meetings this year, with the next monetary policy announcement due out on Sep 20.
Treasury yields are little changed as investors brace for inflation print
United Parcel Service (UPS) cut its financial outlook for the year amid negotiations with the Teamsters union to avoid a strike, the logistics company said. UPS reached a tentative, $30B, agreement with the Intl
Brotherhood of Teamsters on Jul 25 to avoid a work stoppage, with
the union voting to ratify the new agreement. Electronic voting began
on Aug 3 & will conclude on Aug 22. UPS now predicts annual consolidated revenue at around $93B & adjusted operating margin of roughly 11.8% (below the previous
guidance of $97B & 12.8%). The guidance change reflects
"the volume impact from labor negotiations and the costs associated with
the tentative agreement", UPS said. In Jun, 97% of the UPS Teamsters union's 340K members voted to authorize a strike for better pay & working conditions, including air conditioning in new models of the company's brown delivery trucks. Meanwhile, the company also posted a 10.9% drop to $22.1B in consolidated revenue for Q2. "UPS
is stronger than ever. Looking ahead, we will stay on strategy to
capture growth in the most attractive parts of the market and make our
global integrated network even more efficient" CEO Carol
Tomé said despite the revenue decrease. UPS consolidated operating profits for Q2 reached $2.8B, down 21.4% compared to Q2-2022, & down
18.4% on an adjusted basis. Diluted EPS peaked at $2.42, 22.8% below the year $2.54 from the year-ago period. The stock fell 90¢.
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club.ino.com/trend/analysis/stock/UPS_aid=CD3289&a_bid=6aeoso5b6f7
UPS lowers annual outlook on pricy Teamsters' talks
There is not much for investors to do while waiting for inflation data in the next 2 days.
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