Dow fell 250 (near session lows), decliners over advancers better than 3-1 & NAZ retreated 128. The MLP index remained near 252 & the REIT index closed down 7 to the 327s. Junk bond funds slid lower & Treasuries continue to be sold heavily, raising Treasury yields to multi year highs. Oil was up 1+ to nearly 90 & gold gained again, up 16 to 1984 (more on both below).
AMJ (Alerian MLP Index tracking fund)
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Federal Reserve Chair Jerome Powell lauded recent declines in inflation but warned that consumer prices remain "too high" & a return to pre-pandemic levels may require lower-economic growth. "Inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal," Powell said. "While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflation down sustainably to 2 percent." Officials voted at the meeting last month to hold interest rates steady at 5.25-5.50%, the highest level since 2001. However, policymakers also left the door open to an additional increase this year & indicated they will hold rates at peak levels for longer than previously expected. While inflation has declined from a high of 9.1%, it remains above the Fed's 2% target. The Labor Dept reported last week that the consumer price index, a broad measure of the price for everyday goods including gasoline, groceries & rents, rose 0.4% in Sep from the previous month. Prices are up 3.7% from the same time one year ago. The Fed is scheduled to meet 2 more times this year, in Nov & Dec. While most investors agree the central bank will hold rates steady at the upcoming Nov meeting, there is a growing expectation among traders that the Fed will approve another rate hike in Dec, according to the CME Group's FedWatch tool, which tracks trading. Fed officials have increasingly noted the risk of overdoing it, even as the economy remains resilient in the face of higher interest rates.
Fed's Powell admits 'bumpy' path to lowering prices could take longer than Americans would like
Mortgage rates continued to climb this week, adding further pressure to the cooling housing market as more Americans are priced out of buying homes. Freddie Mac reported that the average rate for the benchmark 30-year fixed mortgage jumped to 7.63%, up from 7.57% last week & from 6.94% a year ago. The rate for a 15-year mortgage also climbed, averaging 6.92% after coming in last week at 6.89%. One year ago, the rate on a 15-year fixed note averaged 6.23%. Freddie Mac's chief economist, Sam Khater, recommends borrowers look into their options with multiple lenders before committing to loan terms as mortgage rates are expected to march even higher. "Mortgage rates continued to approach eight percent this week, further impacting affordability," Khater said. "In this environment, it’s important that borrowers shop around with multiple lenders for the best mortgage rate. With research showing down payment is the single largest barrier to first-time homebuyers attaining homeownership, borrowers should also ask their lender about down payment assistance." Home affordability in the US continues to decline as home prices remain elevated due to a lack of supply while rising mortgage rates are driving payments up further. The National Association of Realtors (NAR) reported that home prices rose for the 3rd consecutive month in Sep while existing home sales fell for the 6th straight month. "Given low supply and rising mortgage rates, it’s no surprise sales fell yet again," said Robert Frick, corp economist with Navy Federal Credit Union. "But that they hit a low not seen since 2010, in the aftermath of the burst housing bubble, underscores the housing crisis is worsening."
Mortgage rates rise again amid worsening home affordability crisis
The State Dept issued a worldwide caution alert due to soaring tensions in the Middle East & elsewhere triggered by the ongoing Israel-Hamas war. Citing
the “potential for terrorist attacks, demonstrations or violent actions
against U.S. citizens and interests,” the State Dept warned
Americans abroad to exercise increased caution. Earlier in the week, the State Dept raised its travel advisory alert to Lebanon & warned US citizens not to travel to the country due to “the
unpredictable security situation related to rocket, missile and
artillery exchanges between Israel and Hezbollah or other armed militant
factions.” The State Dept has directed US citizens who are looking for help departing Israel, the West Bank, Gaza & Lebanon to fill out a crisis intake form.
U.S. State Department issues ‘worldwide caution’ alert as tensions in the Middle East soar
Gold rose for a 3rd day, rising to the highest in more than 2 month on a lower $ safe-haven buying amid Israel's war on Hamas on concerns over a widening Middle East conflict. Gold for Dec closed up $12 to settle at $1980 per ounce, the highest since Jul 31. Safe-haven buyers are moving to the safety of the metal as outrage in Arab nations & Iran rose following an explosion near a Gaza hospital initially attributed to an Israeli strike, heightening worries the war between Israel & Hamas could spread as Arab nations & Iran expressed outrage. The rise came even as treasury yields rose to a 17-year high on expectations for a further interest-rate hike from the Federal Reserve. In a speech, Fed chair Jerome Powell said the central bank continues to target a 2% inflation rate but gave no indication of whether interest rates will be raised again.
Gold Edges Rises to a 10-Week High on Safe-Haven Interest and a Lower Dollar
Oil futures ended higher, with US prices edging closer to $90 a barrel. Energy markets are in the grasp of geopolitical events. The biggest fear is an expansion of the Israel-Hamas war, & Iran gets involved. Iran could cause issues in the Strait of Hormuz. Supply disruptions are the biggest concern & they are abating any time soon. Nov West Texas Intermediate crude rose $1.05 (1.2%) to settle at $89.37 a , ahead of the contract's expiration at the end of tomorrow's session.
U.S. Oil Futures Climb Closer to $90 a Barrel
These are scary times around the globe starting with 2 major wars. That drives nervous investors to buy gold. As expected, Powell's talk did not relieve the minds of investors. Powell said that inflation is still too high, signaling that the Fed intends to hold interest rates high for an extended period of time as economic growth remains strong. Dow is where it was 11 months ago.Dow Jones Industrials
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