Dow edged up 22 (below highs at the opening), decliners over advancers 5-4 & NAZ dropped 134. The MLP index added nearly 2 to the 248s & the REIT index was flattish in the 338s. Junk bond funds were higher & Treasuries saw heavy buying which reduced yields. Oil jumped 3+ to the 86s & gold soared 49 to 1932.
AMJ (Alerian MLP Index tracking fund)
Philadelphia Federal Reserve Pres Patrick Harker said he thinks the central bank can stop raising interest rates. “Absent a stark turn in what I see in the data and hear from contacts ... I believe that we are at the point where we can hold rates where they are,” Harker said. “Look, we did a lot, and we did it very fast.” As a voting member this year on the rate-setting Federal Open Market Committee, his words carry extra weight as policymakers contemplate their next step forward. Though his remarks align with what several other officials have said recently, they are perhaps the most explicit endorsement yet of a halt in rate hikes. The Fed has raised its benchmark borrowing rate 11 times since Mar 2022, totaling 5.25 percentage points. In Sep, the FOMC chose to hold rates steady as members differed over where inflation is headed. In recent days, multiple Fed officials have cited the tightened financial conditions brought on by a surge in Treasury yields as helping the central bank in its quest to slow the economy & bring down inflation. However, Harker did not rely on the market moves but instead said the Fed simply has made substantial progress in bringing down prices without causing a surge in unemployment or otherwise tanking the economy. He said it can now watch the impact that its rate hikes are having & use incoming data as its guide to where policy needs to go. “Holding rates steady will let monetary policy do its work. I am sure policy rates are restrictive, and as long they remain so, we will steadily press down on inflation and bring markets into a better balance,” he added. “By doing nothing, we are still doing something. And, actually, we are doing quite a lot.” Reports this week showed that 12-month rates for inflation are coming down but remain above the Fed's 2% annual target. Separate readings on producer & consumer prices both were higher than had been expected, raising the specter that the Fed might have to do more. However, Harker said he won't be moved by one month of data, noting that the Fed's preferred measure, the personal consumption expenditures price index, in Aug showed its smallest monthly increase since 2020. “We will not tolerate a reacceleration in prices,” he said. “But second, I do not want to overreact to the normal month-to-month variability of prices.” “We remain data dependent but patient and cautious with the data,” he added.
Fed’s Harker advocates holding interest rates ‘where they are’
JPMorgan's (JPM), a Dow stock, topped estimates for Q3 profit & revenue as the
bank generated more interest income than expected, while credit costs
were lower than anticipated. EPS surged 35% to $4.33 from a year
earlier. That per-share figure includes 17¢ in securities losses & 22¢ in legal expenses. It wasn't immediately clear which items
were included in LSEG’s $3.96 a share profit estimate. Revenue
climbed 21% to $40.7B, helped by the stronger-than-expected net
interest income. That measure surged 30% to $22.9B, exceeding expectations by roughly $600M. At the same time, credit
provisioning of $1.4B came in far lower than the $2.4B
estimate. JPM's retail banking division saw profit surge 36% to $5.9B, fueled by higher net interest income & the acquisition
of First Republic. Its corp & investment bank saw profit slip
12% to $3.1B on declines in trading & advisory revenue. CEO Jamie Dimon
acknowledged that the biggest US bank by assets was “over-earning” on
net interest income & “below normal” credit costs that will both
normalize over time. While surging interest rates caught some smaller
peers off guard this year, causing upheaval among regional lenders in
Mar, JPM has navigated the turmoil well so far. Dimon
warned that while American consumers & businesses were healthy,
households were spending down cash balances & that tight labor markets & “extremely high government debt levels” meant that interest rates may climb even further from here. The stock rose 4.11 (3%).
If you would like to learn more about JPM, click on this link:
club.ino.com/trend/analysis/stock/JPM_aid=CD3289&a_bid=6aeoso5b6f7
JPMorgan Chase shares pop after profit exceeds expectations on higher rates, benign credit
The average rates for fixed mortgages continued their upward climb this week, accompanied by a marked rise in demand for adjustable loans as consumers seek relief from record-high monthly payments. Freddie Mac's latest Primary Mortgage Market Survey shows that the average rate for the benchmark 30-year fixed-rate mortgage hit 7.57% this week, up from 7.49% last week & 6.92% a year ago. The rate for a 15-year fixed mortgage also rose, averaging 6.89% after coming in last week at 6.78%. One year ago, the rate on a 15-year fixed note averaged 6.09%. "For the fifth consecutive week, mortgage rates rose as ongoing market and geopolitical uncertainty continue to increase," said Sam Khater, Freddie Mac's Chief Economist. "The good news is that the economy and incomes continue to grow at a solid pace, but the housing market remains fraught with significant affordability constraints. As a result, purchase demand remains at a three-decade low." Of those who are in the market to buy a home right now, there has been a surge in consumers opting for mortgages with adjustable rate mortgages (ARMs), which tend to start with a lower rate but can rise over the life of loan. "Mortgage applications increased for the first time in three weeks, pushed higher by a 15 percent jump in ARM applications," Mortgage Bankers Association (MBA) Pres Bob Broeksmit said. "With mortgage rates well above 7 percent, some prospective homebuyers are turning to ARMs to lower their monthly payment in the short term amidst these high mortgage rates." The average contract interest rate for a 5/1 ARM, a loan with a rate that is fixed for 5 years & can adjust once annually thereafter, fell to 6.33% this week, down from 6.49% from last week, according to the MBA's data. Housing affordability in the US reached an all-time low over the summer, & has continued to get worse as mortgage rates rise & home prices remain high due to a lack of homes for sale as more homeowners who are locked in a lower interest rates stay put rather than sell.
Mortgage rates climb again, more opting for adjustable rates
Stocks tried to rally this week, that effort failed. Earnings reports will drive the market next week. The effects of higher inflation are still around. Oil is near its high in the last year & that will pinch any economic recovery.
Dow Jones Industrials
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