Dow climbed 167, advancers over decliners 3-1 & NAZ gained 88. The MLP index added 1+ to the 251s & the REIT index was up 2+ to the 356s. Junk bond funds remained in demand & Treasuries had selling, raising Treasury yields (more below). Oil slid back 1 to the 77s & gold crawled up 1 to 1967.
AMJ (Alerian MLP Index tracking fund)
Inflation at the wholesale level posted a surprise decline in
Oct, the latest sign that high consumer prices are beginning to
loosen their stranglehold on the US economy. The Labor Dept said that its producer price index, which measures inflation at the wholesale level
before it reaches consumers, tumbled 0.5% in Oct from the previous
month. On an annual basis, prices remain up 1.3%, a sharp drop from the
2.2% recorded in Sep. In another sign that suggests high
inflation is beginning to dissipate, core prices,which exclude the
more volatile measurements of food & energy, were unchanged for the
month. That is lower than both the 0.3% estimate & the reading
recorded last month. The figure was up 2.4% on a 12-month basis. The data comes a day after the Labor Dept reported that the consumer price index, which measures the prices paid directly by consumers, eased more than expected in Oct. The
back-to-back inflation reports will have major implications for the
Federal Reserve, which has raised interest rates at the fastest pace in
decades as it tries to cool the economy. The central bank approved 11 rate hikes over the course of 16 months,
lifting the federal funds rate to the highest level since 2001.
Wholesale inflation unexpectedly tumbles 0.5% in October, biggest drop in 3 years
Current homeowners & potential homebuyers are responding to lower mortgage rates, albeit slowly. Mortgage demand rose 2.8% last week, compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. That was the 2nd straight week of gains. After dropping sharply the previous week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) remained unchanged at 7.61% last week, with points decreasing to 0.67 from 0.69, including the origination fee, for loans with a 20% down payment. “Although Treasury rates dipped midweek, mortgage rates were little changed on average through the week,” said Joel Kan, MBA's VP & deputy chief economist. Still, applications to refinance a home loan increased 2% for the week & were 7% higher than the same week one year ago. Mortgage rates this month are not that much different from Nov of last year, so there is not a lot of new incentive to refinance. Most borrowers carry much lower interest rates due to the record low rates seen during the first few years of the Covid-19 pandemic. Applications for a mortgage to purchase a home increased 3% from the previous week & were 12% lower than the same week a year ago. Lower rates may help a little, but still-rising home prices & the still-low supply of homes are bigger hurdles for today's potential buyers. “Both purchase and refinance applications increased to the highest weekly pace in five weeks but remain at very low levels. Despite the recent downward trend, mortgage rates at current levels are still challenging for many prospective homebuyers and current homeowners,” added Kan.
Mortgage demand climbs to the highest level in five weeks after interest rates move lower
Treasury yields were higher, recovering some of their losses from the previous session, as investors digested inflation data that suggested the Federal Reserve may be done raising rates. The 2-year Treasury yield was up 9 basis points at 4.91%, after dropping by as many as 21 basis points yesterday. The benchmark 10-year Treasury climbed more than 10 basis points to 4.54%. It had lost 18 basis points to tumble below the 4.5% mark yesterday. Yields & prices move in opposite directions & 1 basis point equals 0.01%. The rebound in yields came after another encouraging inflation report. The producer price index for Oct showed a surprise decline of 0.5%. The forecast called for the index to rise 0.1%. The PPI for goods drove the decline, falling 1.4%, & the prices for final demand services were flat month over month. Treasury yields had declined yesterday, following the release of the Oct consumer price index reading, which came in lower than expected. The annual rate for core CPI hit a 2-year low of 4%. On a monthly basis, the core-CPI, which excludes food & energy prices, reflected a 0.2% increase. The forecast expected the figures to come in at 4.1% & 0.3%, respectively. The data led markets to cut almost any chance of a rate hike in Dec, the CME Group's FedWatch tool showed. The likelihood of rates remaining unchanged last stood at 99.8% according to the data. Questions around whether the Fed would need to hike rates further to bring inflation back to its 2% target have been circling since the central bank's last meeting, where it left rates unchanged but kept the door open for rates to head higher still.
Treasury yields rise despite another report that shows inflation is falling
Dow Jones Industrials
No comments:
Post a Comment