Dow dropped 179, decliners over advancers a hefty 5-1 & NAZ was off 169. The MLP index was off fractionally to the 246s after recent strength & the REIT index fell 6+ to the 352s. Junk bond funds fluctuated & Treasuries were very heavily sold, raising yields substantially (more below). Oil went over 90 again & gold sank 26 to 1940.
AMJ (Alerian MLP Index tracking fund)
Sales of previously owned homes fell 0.7% in Aug from Jul to a seasonally adjusted, annualized rate of 4.04M units, according to the National Association of Realtors (NAR). Sales were down 15.3% from Aug of last year. This read is based on closings for contracts likely signed in Jun & Jul, when the average rate on the popular 30-year fixed mortgage was in the high 6% range. It moved over 7% toward the end of Jul & stayed there, hitting affordability hard. “Home sales have been stable for several months, neither rising nor falling in any meaningful way,” said Lawrence Yun, chief economist at the NAR, in a release. “Mortgage rate changes will have a big impact over the short run, while job gains will have a steady, positive impact over the long run.” It is not, however, just higher rates hitting potential buyers. They are also not finding much on the market. There were just 1.1M units for sale at the end of Augt, down 0.9% for the month & down just more than 14% year over year. Inventory is now at a 3.3-month supply. A 6-month supply is considered balanced between buyer & seller. Tight supply has turned prices decidedly higher again. The median price of a home sold in Aug was $407K, up 3.9% from a year ago & the highest reported price for the month of Aug. Yun said supply needs to double to moderate these price gains. “Homeowners are in fine shape. It’s Realtors and mortgage brokers that are challenged, and renters are frustrated,” Yun added.
Home sales stick near recent lows in August, but prices continue to climb
Treasury yields continued their march higher, reaching multiyear highs, as investors digested the Federal Reserve's interest rate decision& forward guidance along with new unemployment data. The yield on the 10-year Treasury was up by around 13 basis points at 4.482%, hitting a fresh 2007 high in the session & the 2-year Treasury was more than 8 basis points higher to 5.197%, hovering around levels last reached in 2006. Yields on the 5-year note & 30-year bond also touched their highest levels since 2007 & 2011, respectively. Yields & prices have an inverted relationship & 1 basis point equals 0.01%. Treasury yields reached their highs of the day after the release of new unemployment data. Initial jobless claims came in at 201K, well below a forecast of 225K. It was also their lowest level since Jan. It was the lowest volume of new unemployment claims since Jan. Traders seemed to interpret the data as a sign the Fed may need to tighten policy further to tame inflation. After his announcement, Fed Chair Jerome Powell said the central bank was in a position where it could “proceed carefully” with its monetary policy. Policymakers would, however, like to see more progress in the fight against inflation, even though pressures have somewhat eased, Powell indicated. The Fed also released its projections for several key economic indicators, saying it expects the GDP to increase by 2.1% this year, which is far higher than previous forecast. Meanwhile, the core personal consumption expenditures price index, which is used to track the inflation rate, is now expected to come in at 3.7%, lower than predicted in Jun.
10-year Treasury yield hits its highest level since 2007 as jobless claims decline
Cisco (CSCO), a Dow stock, is acquiring cybersecurity software company Splunk (SPLK) for $157 per share in a cash deal worth about $28B in its largest acquisition ever. “From threat detection and response to threat prediction and
prevention, we will help make organizations of all sizes more secure and
resilient,” CEO Chuck Robbins said. The
deal, which is expected to close in the 3rd qtr of 2024, continues
a months-long buying spree to build out its cybersecurity
offerings. CSCO expects the deal to be cash flow positive &
gross margin accretive in the first year following the closing of the
acquisition; it will be accretive to CSCO's non-GAAP EPS
by the 2nd year. Robbins expected organizational synergies to
become clear & impactful within 12-18 months. The company will finance
the deal with a combination of cash & debt. “Together, we will become one of the largest software companies globally,” Robbins added. CSCO stock fell 2.15 (4%).
If you would like to learn more about CSCO, click on this link:
club.ino.com/trend/analysis/stock/CSCO _aid=CD3289&a_bid=6aeoso5b6f7
Cisco acquires cybersecurity company Splunk in cash deal worth $28 billion
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