Markets fall to close the worst month of the year

Dow declined 158, advancers barely ahead of decliners & NAZ crawled up 18.  The MLP index fell 1+ to the 247s & the REIT index stayed even in the 338s.  Junk bond funds crawled higher & Treasuries had limited buying which lowered yields.  Oil was off almost 1 to finish under 91 & gold dropped 13 to 1864 (more on both below).

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United Auto Workers (UAW) Pres Shawn Fain told his membership that the union's strike against Detroit's Big Three automakers will expand against Ford (F) & General Motors (GM), but there will be no additional Stellantis (STLA) plants targeted at this time.  "Despite our willingness to bargain, Ford and GM have refused to make meaningful progress at the table," Fain said.  "To be clear, negotiations haven't broke down. We're still talking with all companies, and I'm still very hopeful that we can reach a deal that reflects the incredible sacrifices and contributions our members made over the last decade."  The union boss called on members at Ford's Chicago assembly plant & GM's Lansing, Michigan, assembly plant to walk out today at noon.  The 7000 workers at those 2 facilities bring the total striking members at the Big Three to around 25K.  In response to Fain's message, GM exec VP of global manufacturing & sustainability, Gerald Johnson, said, "We still have not received a comprehensive counteroffer from UAW leadership to our latest proposal made on September 21. Calling more strikes is just for the headlines, not real progress."  "Our current, record proposal that is on the table offers historic wage increases and job security while not jeopardizing our future," Johnson continued.  "We’re here to reach an agreement so we can all get back to work, and that remains our 100% focus. Be safe."  Ford CEO Jim Farley held a media briefing today, where he said, "We've stayed quiet and worked around the clock in an effort to reach a deal. But with today's strike expansion by the UAW, I think it's time to share some facts and provide an update on the talks before we get into details."  STLA also released a statement following Fain's announcement, saying, the company "has been intensely working with the UAW to find solutions to the issues that are of most concern to our employees while ensuring the Company can remain competitive given the market’s fierce competition."  The UAW's plan is to ramp up its strike incrementally as negotiations drag on without agreements in place, but has not ruled out a national walkout by all 150K of its members across the Big Three.  It's a strategy the union has said enables it more flexibility in the escalation & makes it more difficult for auto companies to predict its next move.

Union expands strikes as negotiations fail to yield 'meaningful progress'

House GOP leaders failed to pass a partisan, short-term spending bill with fewer than 2 days left to fund the federal gov & avoid a shutdown.  The final vote was 198 to 232, with more than 20 Reps crossing the aisle to oppose their own party's bill.  Speaker Kevin McCarthy pitched the bill as a way for his fellow Reps to buy time to pass a slate of individual agency spending bills.  The House Reps who joined Dems to vote against it included several of McCarthy's most outspoken antagonists, like Florida Rep Matt Gaetz & Arizona Reps Andy Biggs & Eli Crane.  “We actually need a stop-gap measure to allow the House to continue to finish its work, to make sure our military gets paid, to make sure our border agents get paid as we finish the job that we’re supposed to do,” McCarthy said.  The White House blasted the House GOP caucus for engaging in brinksmanship & dismissed McCarthy's suggestion that he would not take a paycheck during a shutdown.  “That is theater. The guy who picks up the trash in my office won’t get a paycheck. That’s real,” said Shalanda Young, director of the White House Office of Management & Budget.  “We’re doing everything we can to plead, beg, shame House Republicans to do the right thing,” she added.  The GOP bill would have funded the gov thru Oct 31.  But it had effectively no chance of passing the Senate, which is controlled by Dems, or of being signed by Pres Biden.  The White House said Biden would stay “in dialogue with Congress,” over the coming days, but insisted the core elements of any spending bill had been agreed to as part of the debt ceiling deal earlier this year.  The Senate easily advanced its own short-term funding bill yesterday by a 76-22 margin.  The next vote in that chamber is scheduled for Sat.  The Senate bill is likely to be amended ahead of Sat's vote & the next version could contain stronger border security measures that House Rep are demanding.  Missing the Senate vote will be Sen Dianne Feinstein, the California Dem who died late yesterday at her home in DC.  The gov is scheduled to shut down at 12:01 AM Sun if a funding bill is not approved by Congress & signed into law by Biden.  Across DC, gov agencies prepared their employees & the public for the effects of a shutdown.

Republican spending plan fails House vote, fueling federal government shutdown fears

Lower-end consumers have shifted buying patterns to save money as their bank accounts dwindle in size, according to Citigroup (C) CEO Jane Fraser.  The 3rd-largest US bank by assets has been monitoring its credit card customers for signs of distress, Fraser said.  “We are paying attention to the lower FICO consumer, where there are cracks” forming, Fraser said, referring to the widely used credit-scoring system from Fair Isaac Corp  “I think some of the excess savings from the Covid years are getting close to depletion.”  The gov injected Ts  of $s into households & businesses during the pandemic to avert disaster, money that has helped keep the economy humming for longer than many forecasters expected.  At the same time, the Federal Reserve's most aggressive interest rate hiking cycle in 4 decades has made credit card, mortgage & auto debt more expensive, & late payments & defaults have been climbing.  Besides comments on artificial intelligence & labor tightness, corp leaders have told her that demand is softening.  “Particularly [for] the bottom end of the consumer, that’s the one that we’re starting to see cracks, you’re seeing some shift in the buying patterns to lower categories in the spend,” Fraser added.  “It’s a resilient consumer, but it’s a softer one.”  Softening demand may help the Fed in its battle with inflation, the CEO noted.  While employment & gross domestic product figures suggest the economy will achieve a “soft landing,” if it does tip into recession, it will likely be a “manageable” one, Fraser continued.

Citigroup CEO Jane Fraser sees ‘cracks’ emerging among some consumers as savings dry up

Gold prices fell for a 2nd qtr in a row after losses that began in Aug & held thru Sep, underscored by the current week's drop — the worst in more than 2 years.  Gold's most-active futures contract, Dec, settled at $1866 an ounce, down $12 (0.7%) on the day.  The benchmark for US gold futures was down 4% for the week, its biggest weekly decline since a near 6% plunge during the week to Jun 11, 2021.  For the 3rd qtr, the drop on gold was around 3%, after declines of 2% in Aug & 5% in Sep that offset Jul's gain of 4%.  In Q2, gold futures fell almost 4%.

Gold Tumbles Second Straight Quarter, Worst Week Since 2021

Oil futures declined, but US prices notched a gain of nearly 9% for the month.  Oil was solidly on its path to $100, but the trio of inflation, rates & the Fed have come back from the dead & shaken up the confidence.  If interest rates do hold higher for longer, then oil is headed higher.  For now, the only certainty in the market is volatility.  Nov West Texas Intermediate crude declined by 92¢ (1%) to settle at $90.79 a barrel.  Prices based on front-month contract ended 0.8% higher for the week, gained 8.6% for the month, & were up 28.5% for the qtr.

Oil Futures End Lower for The Session, Higher for The Month and Quarter

A big strike which shows no sign of ending, a probable gov shutdown & high interest rates not ending anytime soon are what stocks face in Q4.  Dow is down 900 in the qtr & over 1200 in Sep.  Grrrr!!                                   

Dow Jones Industrials 

Markets edge higher as Fed-favored inflation data cools

Dow was off 2, advancers over decliners about 3-1 & NAZ advanced 125.  The MLP index was off 1 to the 247s & the REIT index rebounded 2+ to 341.  Junk bond funds were mixed & Treasuries had significant buying, reducing yields.  Oil pulled back 1, going under 91, & gold slid 1 to 1877, following recent weakness.

AMJ (Alerian MLP Index tracking fund)

 

 

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The House of Representatives passed multiple appropriations bills to fund the State Dept, the Dept of Defense & the Dept of Homeland Security than fiscal year 2024 as lawmakers work to avert a gov shutdown.  The bill to fund the State Dept & foreign operations passed by a 216-212 vote.  Only 2 Reps voted against the measure.  Provisions in the annual spending bill to provide $300M to Ukraine as its war against Russia continues faced opposition from some Rep House members.  House Speaker Kevin McCarth removed the Ukraine funding from the Defense spending bill to gain more support from the members of his party who take issue with additional funding for the eastern European nation.  The Pentagon bill without the aid for Ukraine aid passed the House 218-210, with Rep Reps.  Tim Burchett of Tennessee & Ken Buck of Colorado voting against the legislation while Democrat Reps Jared Golden of Maine & Marie Gluesenkamp Perez of Washington joining the rest of the Reps to pass the measure.  A separate bill to provide the $300M in aid to Ukraine passed in a 311-117 vote, with more than 100 Reps joining House Dems to advance the legislation.  The Homeland Security legislation passed 220-208 & includes more than $2B for the construction of a wall at the Southern Border amid an influx of migrants attempting to enter the US thru Mexico.  Golden & Gluesenkamp Perez were again the only Dems joining Reps to pass the bill.  The House passing the bills marks the first time since Jul that the House has sent appropriations measures to the Senate, but the passage of the legislation will not prevent the gov shutdown as the deadline to fund the gov is just days away.

House passes bills to fund federal agencies as shutdown looms

The average rate on the benchmark 30-year fixed mortgage surged again this week, hitting the highest level in nearly 23 years.  Freddie Mac's latest Primary Mortgage Market Survey shows that the average rate for a 30-year fixed note climbed to 7.31%, up from 7.19% last week & from 6.7% a year ago.  The rate on a 15-year mortgage also rose, averaging 6.72% after coming in last week at 6.54%.  One year ago, the rate on a 15-year fixed note averaged 5.96%.  "The 30-year fixed-rate mortgage has hit the highest level since the year 2000," said Sam Khater, Freddie Mac's chief economist.  "However, unlike the turn of the millennium, house prices today are rising alongside mortgage rates, primarily due to low inventory. These headwinds are causing both buyers and sellers to hold out for better circumstances."  Indeed, the latest data from the National Association of Realtors found that pending home sales tumbled 7.1% in the US last month, indicating that high housing costs are causing more consumers to balk at making a deal.  Would-be buyers are increasingly being priced out of the market or getting sticker shock, with the median monthly mortgage payment recently hitting an all-time high of $2632.  Meanwhile, would-be sellers locked in at much lower mortgage rates are staying put, contributing further to the ongoing inventory shortage that has been driving up home prices ever since the pandemic began.

Mortgage rates climb further, near 23-year high

An inflation measure closely watched by the Federal Reserve ticked higher in Aug as steep prices continue to squeeze Ms of US households.  The personal consumption expenditures (PCE) index showed that consumer prices rose 0.4% from the previous month, according to the Labor Dept.  On an annual basis, prices climbed 3.5% – up from 3.3% recorded the previous month, underscoring the challenge of taming high inflation.  The figures were both in line with estimates.  In a sign the Fed's fight against inflation is making progress, core prices, which strip out the more volatile measurements of food & energy, climbed 0.1% from the previous month & 3.9% from the previous year.  It marked the best reading for core inflation since 2021.  While the Fed is targeting the PCE headline figure as it tries to wrestle consumer prices back to 2%, Chair Jerome Powell previously said that core data is actually a better indicator of inflation.  Still, both the core & headline numbers point to inflation that continues to run above the Fed's preferred 2% target.  Other figures included in the report showed that consumer spending rose just 0.4% in Aug, compared to a 0.9% increase in Jul.  Many economists anticipate that spending will slow in the coming months as consumers continue to grapple with expensive goods, high interest rates & the resumption of federal student loan payments.

Key Fed inflation gauge accelerated again in August as high prices persist

The stock market continues to struggle, unable to find enough buyers to end its recent decline.  In the near term, Congress needs to pass funding by tomorrow to run the gov.  Sen Feinstein just passed away, narrowing the the Dem's majority in the Senate.  There continues to be a lot of uncertainty for investors to digest.

Dow Jones Industrials

 

Markets rise after yields dip following their recent rally

Dow went up 116, advancers over decliners 2-1 & NAZ gained 108.  The MLP index was up 2+ to the 238s & the REIT index rose 2+ to the 338s.  Junk bond funds found buyers today & Treasuries had limited buying which lowered yields.  Oil dropped almost 2 to the high 91s on profit taking after its recent run & gold was off another 8 to 1882.

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Pending home sales plunged in the US last month as high mortgage rates deterred more would-be buyers & sellers from making deals.  The National Association of Realtors' Pending Home Sales Index (NAR) tumbled 7.1% to 71.8 in Aug, a much greater decline than the 0.8% drop analysts expected.  Year over year, pending transactions are down 18.7%, the NAR's data shows.  "Mortgage rates have been rising above 7% since Aug, which has diminished the pool of home buyers," said Lawrence Yun, NAR's chief economist.  "Some would-be home buyers are taking a pause and readjusting their expectations about the location and type of home to better fit their budgets."  Meanwhile, would-be sellers locked in with much lower rates are staying put, contributing further to the ongoing inventory shortage that has been driving up home prices ever since the pandemic began.  The sale of new homes dropped unexpectedly in Aug, too, falling 8.7% to a seasonally adjusted annual rate of 675K units, according to the latest data from the Commerce Dept.  The decline in sales indicates that a resurgence in mortgage rates is pushing many would-be buyers out of the market.  That slowdown in demand contributed to a decline in new home prices last month.  The median price for a new home fell to $430K from $437K the previous month.  Still, that remains far higher than the typical pre-pandemic level.  The number of available homes on the market at the end of Jul was down by more than 9% from the same time last year & down 46% from the typical amount before the COVID-19 pandemic began in early 2020, according to a recent report from Realtor.com.  Redfin reported earlier this month that the median monthly mortgage payment hitan all-time high of $2632 during the 4 weeks ending Sep 10.  At the same time, the average interest rate for the benchmark 30-year fixed-rate mortgage has remained above 7%,& hit a 23-year high of 7.41% last week, according to the Mortgage Bankers Association.  "It's clear that increased housing inventory and better interest rates are essential to revive the housing market," Yun added.

US pending home sales plummet as high mortgage rates take a toll

Americans filing for unemployment claims edged higher by 2K to 240K last week, well below markets expectations of 215K to remain close to the close to the over 7-month low in the earlier week.  In the meantime, continuing claims rose by 12K to 1670K, under market expectations of 1675K & remaining close to the near 8-month-low recorded previously.  The data added evidence that the labor market remains at historically tight levels, pointing to added resilience to the Federal Reserve's aggressive tightening cycle & adding leeway for a potential hike in Nov.  In the meantime, the 4-week moving average fell by 6K to 611K.

United States Initial Jobless Claims 2023 Data

As Congress scrambles to avoid a gov shutdown, a budget watchdog warns that the chances are not in their favor.  "Experts see the chances having shot up to almost 90% at this point," Committee for a Responsible Federal Budget Pres Maya MacGuineas said.  MacGuineas argued that Congress doesn't have enough time to "get done what they need unless every single thing falls into place."  The gov is facing the threat of shutting down & causing federal workers to go without pay if Congress does not pass a funding bill by midnight. EST on Sep 30.  "It’s so silly," MacGuineas said.  "This is a deadline we’ve known about. It comes at the same time every single year," she stressed.  Lawmakers in Congress are negotiating over a short-term continuing resolution (CR) that would extend funding on a short-term basis to allow negotiations over spending levels for the rest of fiscal year 2024 to play out & legislation to be passed.  MacGuineas said that she's "optimistic" about a deal, suggesting that members of Congress could agree to a "very short-term" continuing resolution to "give themselves a little breathing room."  House Reps are divided over the duration of a CR & whether other provisions like border security measures, Ukraine funding & disaster relief should be attached.  She believes the "best approach" to quell some of the House Reps lengthy demands would be to have a "clean" CR & then "address" other issues these issues separately."  "If you get into the habit where you can throw everything and the kitchen sink into any of this must-pass legislation, it complicates it," she explained.

Government shutdown chances just hit 90%, budget watchdog warns

Gold closed at a fresh since month low even as the $ dropped off a 13-month high.  Gold for Dec closed down $12 to settle at $1878 per ounce. the lowest since Mar 10.  The price of the precious metal has suffered due to a strong $ & treasury yields that have climbed following the Federal Reserve's hawkish outlook last week that suggested another hike to interest rates before year end.  High bond yields & a strong greenback are exerting downward pressure on gold prices.  But uncertainty is almost entirely negating their impact as investors seek out safe havens like gold.  Expect the price of gold to slip slightly over the coming months to end the year.  The $ moved lower early today, making gold more affordable for intl buyers.  The ICE dollar index was last seen down 0.4 points to 106.26.  Treasury yields were mixed.  The yield on the 2-year note was last seen down 5.0 basis points to 5.092%, while the 10-year note was last seen paying 4.624%, up 0.8 basis points, after earlier touching 4.684%, the highest since 2007.

Gold Closes at a Six-Month Low amid a Lower Dollar and Mixed Treasury Yields

Oil futures ended sharply lower, giving up gains that had seen the US benchmark trade above the $95-a-barrel threshold for the first time in a year as investors weighed tightening US crude inventories.  West Texas Intermediate crude for Nov fell $1.97 (2.1%) to end at $91.71 a barrel, after trading as high as $95.03.  Nov Bre, the global benchmark, settled at $95.38 a barrel, down $1.17 (1.2%) after hitting a session high of $97.69.  Oil was ripe for a pullback.  After coming just short of the $100 level, energy traders are quickly locking in profits given the turbulence happening in the bond market.  The yield on the 10-year Treasury note traded near 3.70% in earlier activity before pulling back.  A sharp rise in yields to 16-year highs is stirring fears over the economic outlook & sparking volatility across financial markets.  The Energy Information Administration yesterday reported that crude stocks at the Cushing, Okla, delivery hub fell to under 22M barrels.  That is close to operational minimums & lowest since the seasonal lows of 2014.  The inventories data energized a yesterday rally that saw the US benchmark log its highest close in nearly 13 months.

Oil ends lower after U.S. benchmark briefly climbs above $95 a barrel

Mortgage rates hits a 23-year high & the 10-year Treasury yield spiked to its highest point since 2007.  But that did not keep stock buyers away.  However as long as yields are elevated, this enthusiasm can not last very long.

Dow Jones Industrials