Dow was off 175, decliners over advancers 4-1 & NAZ declined 133. The MLP index added 2+ to 253 & the REIT index dropped 4+ to the 337s. Junk bond funds fluctuated & Treasuries had more selling raising higher yields further (more below). Oil rose 1+ to the 88s (around 1 year highs) & gold shot up 24 to 1960.
AMJ (Alerian MLP Index tracking fund)
Mortgage rates last week rose for the 6th straight week, causing demand for home loans to drop to the lowest level since 1995. Total application volume fell 6.9% compared with the previous week, according to the Mortgage Bankers Association's seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) increased to 7.70% from 7.67% & points decreased to 0.71 from 0.75 (including the origination fee) for loans with a 20% down payment. That is the highest rate since 2000. The rate was 6.94% during the same week one year ago. Applications for a mortgage to purchase a home dropped 6% week to week & were 21% lower than the same week 1 year ago. Applications to refinance a home loan fell 10% for the week & were 12% lower than a year ago. “Both purchase and refinance applications declined, driven by larger drops for conventional applications,” said Joel Kan, VP & deputy chief economist at the MBA, in a release. He added that the adjustable-rate mortgage (ARM) share was 9.3%, the highest share in 11 months.
Mortgage demand falls to the lowest level since 1995 as interest rates near 8%
New home construction rebounded in Sep after a steep drop the previous month, even as the housing market continues to confront high mortgage rates. Housing starts rose 7% last month to an annual rate of 1.35M units, according to new Commerce Dept data. That is slightly below the forecast for a pace of 1.38M units. However, applications to build, which measures future construction, fell in Sep, sliding 4.4% over the course of the month to an annualized rate of 1.47M units. When compared with the same time last year, building permits are down about 7.2%. The data comes one day after the National Association of Home Builders/Wells Fargo Housing Market Index (NAHB), which measures the pulse of the single-family housing market, fell five points to 40, the lowest reading since last Jan. The decline followed a 5-point drop in Sep. Any reading below 50 is considered negative. "Builders have reported lower levels of buyer traffic, as some buyers, particularly younger ones, are priced out of the market because of higher interest rates," said NAHB Chair Alicia Huey. "Higher rates are also increasing the cost and availability of builder development and construction loans, which harms supply and contributes to lower housing affordability." Rates are expected to remain elevated, as the Federal Reserve has signaled that it may hold interest rates at peak levels for longer than previously anticipated. Rates on the popular 30-year fixed mortgage are currently hovering around 7.57%, according to Freddie Mac, well above the 6.92% rate recorded one year ago & the pre-pandemic average of 3.9%. It is the highest level in more than 2 decades.
Housing starts rebound in September amid spike in mortgage rates
Treasuries were little changed as investors digested the latest economic data & considered the outlook for Federal Reserve interest rates. The 10-year Treasury yield was down nearly 1 basis point to 4.839%, trading near 16-year highs seen in early Oct & the 2-year Treasury yield was trading more than 1 basis point lower at 5.199% after yesterday hitting levels last seen since 2006. Yields & prices move in opposite directions & 1 basis point equals 0.01%. Retail sales figures for Sep increased by 0.7% for the month. That's far higher than the 0.3% anticipated & indicates resilience from consumers in light of higher interest rates & other economic pressures. The data brought up renewed concerns over the outlook for interest rates, with some investors viewing it as an indication that rates may be hiked further or at least kept elevated for longer. Markets are still pricing in a 90% chance that rates will remain unchanged when the Fed announces its next monetary decision on Nov 1, but the probability of a Dec rate increase rose after yesterday's data, according to the CME Group's FedWatch tool. In recent days & weeks, various Fed officials have indicated that the central bank may be done hiking, especially as higher Treasury yields are contributing to tighter economic conditions. Further comments from policymakers are expected this week, including by Fed Chair Jerome Powell. Investors are looking to their comments for hints about their policy expectations.
10-year Treasury yield steadies near highest level in 16 years
Dow Jones Industrials
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