Dow dropped 345, decliners over advancers by more than 6-1 & NAZ sank. The MLP index was off another 2+ to 241 & the REIT index lost 6+ to the 326s (not seen since May 2020). Junk bond funds declined along with stocks & Treasuries were sold once again, raising yields. Oil was pennies lower in the 88s & gold slid back 1 to 1845.
AMJ (Alerian MLP Index tracking fund)
The 10-year Treasury yield, which serves as a benchmark for mortgage rates & as an investor confidence barometer, surged to its highest level since 2007. The 10-year Treasury yield was last up about 8 basis points to 4.758% & the 30-year Treasury yield rose as high 4.874%, also the highest since 2007. The 2-year Treasury yield, which is sensitive to expectations around where the Federal Reserve will set its own key borrowing rate, increased slightly to 5.129%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. Aug's Job Openings & Labor Turnover survey showed a still tight labor market, giving the Federal Reserve the green light to keep lifting rates. In recent public remarks, Fed policymakers have indicated disagreement about whether another rate hike is needed before the end of the year, but concur that rates will have to stay elevated for what could be a prolonged period of time. Yesterday, Fed Vice Chair for Supervision Michael Barr said it's less important to focus on another hike & more critical to understand that rates likely will remain elevated “for some time.” And Cleveland Fed Pres Loretta Mester, a nonvoter this year on the FOMC, said “we may well need to raise the fed funds rate once more this year and then hold it there for some time.”
10-year and 30-year Treasury yields rise to their highest levels since 2007
Employment vacancies at US businesses unexpectedly surged in Aug, a sign that the labor market remains tight & robust despite the Federal Reserve's efforts to slow the economy. Job openings totaled 9.6M for the month, a jump of nearly 700K from Jul & well above the for 8.8M, the Labor Dept said in its monthly Job Openings& Labor Turnover Survey (JOLTS). Hires, however, rose only modestly, moving up to 5.857M, an increase of just 35K. The Fed follows the JOLTS report closely for signs of labor slack. Openings had been on the decline for the last several months, indicating that the central bank's interest rates hikes were beginning to have an impact on a labor market that had been hit by a large supply-demand mismatch in which openings had outnumbered available workers 2 to 1. The ratio now is down to 1.5-1.0, following an increase of workers classified as unemployed in Aug. The Aug JOLTS report comes just a few days ahead of the dept's nonfarm payrolls count for Sep. The forecast expects that report, due Fri, to show an increase of 170K. Quits, a measure of worker confidence in finding a new job after leaving a previous position, were little changed. That also was the case with total separations & layoffs.
August job openings top 9.6 million, more than expected as labor market remains strong
Home sales in the US increased 0.7% month-over-month in Jul to
387K, representing the most significant bump since the beginning of
the year, according to the latest data by Redfin. However,
home sales have yet to reach pre-pandemic levels & still sit at 5.4%
above the low point from Mar 2022 of 367K units, the lowest levels
since the onset of the pandemic. On an annual basis, home sales
dropped 15.7% in Jul, marking the smallest annual decline since last
summer. Nonetheless, homebuyer demand remains strained by high home
prices & rising interest rates. "Home sales hit a bottom in
2022 and haven’t meaningfully budged since," Redfin Chief Economist
Daryl Fairweather said. "Fading recession fears and the
prospect of further home price increases have brought some house hunters
off the sidelines, but for the most part, buyers remain hesitant to
jump into the market because their buying power is so much lower than it
was a year ago." The median annual home sale price
increased 1.7% in Jul to $422K, according to Redfin’s data. That
translates to 2.5% below the record high of $432K set in May 2022. High home prices have been partly driven by a severe lack of
available homes for sale that’s pushing determined homebuyers into a
roughly competitive housing market. The
total number of homes for sale dropped 3.9% month-over-month in Jul to
its lowest level on record. "It’s
a seller’s market, but only because there’s so little inventory," Salt
Lake City Redfin Premier real estate agent Mitch Price said. "Buyers are getting hammered by high interest rates, so
they’re not just jumping on whatever is available like they were before.
They don’t want to overpay, so they’re waiting for the right home. As a
seller, if you overprice your home, that’s your doomsday ticket." In addition, homebuyers have had to deal with rising mortgage rates.
Home sales increase to highest level since start of year: Redfin
The JOLTS report sent a negative signal to the stock market which has been absorbing other disturbing reports. High interest rates continue to keep buyers away. Currently Dow is down 74 YTD as investors are afraid to buy at present levels.
Dow Jones Industrials
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