Dow slid back 34, advancers barely ahead of decliners & NAZ added 17. The MLP index edged up 1+ to the 246s & the REIT index was off 1+ to 340. Junk bond funds hardly budged & Treasuries had limited selling which took yields a little higher. Oil rebounded to the high 76s (where it was at the start of last year) & gold gained 9 to 1967.
AMJ (Alerian MLP Index tracking fund)
The number of homes for sale on the market fell for the 4th straight month in Oct as the already severe housing shortage persists. A new report from Realtor.com shows that the total number of homes for sale, including homes that were under contract but not yet sold, fell 4% in Oct compared with the same time a year ago. On top of that, available home supply remains down a stunning 41.8% from the typical amount before the COVID-19 pandemic began in early 2020. "The current housing market continues to challenge homebuyers and sellers alike, but we do see signs of adjustment," said Danielle Hale, chief economist at Realtor.com. "While record-high mortgage rates are putting off many would-be buyers, decreases in both inventory and time homes spend on the market shows that some buyers are moving quickly to lock in rates before they can go any higher." Still, there are some signs of improvement on the inventory front. The report indicated that total inventory rose 5.1% in Oct from the previous month, even though typically the number of homes for sale declines in the fall. The lack of available homes for sale is keeping prices uncomfortably high, even though mortgage rates are hovering near the highest level in 2 decades. Sellers who locked in a low mortgage rate before the pandemic began have been reluctant to sell, leaving few options for eager would-be buyers. "Listing prices have been buoyed by scarce inventory and, while new home sales have been increasing, construction activity isn’t elevated enough to fully bridge the low inventory gap," the report added. While the median listing price is mostly unchanged from the same time last year, higher mortgage rates compared with Oct 2022 have increased the monthly cost of financing a typical home by about $166 per month (7.4%). That marks a new record "on top of what was already the highest amount" since Realtor.com began tracking the data in mid-2016. In order to purchase a median-priced home, income needs to increase by $6600 to $120K.
US housing inventory remains painfully low as shortage persists
Credit card debt is mounting. Americans now owe $1.08T on their credit cards, the Federal Reserve Bank of New York reported. Balances jumped 15% from a year ago, according to a separate quarterly credit industry insights report from TransUnion, while the average balance per consumer hit $6088, the highest in 10 years. Persistent inflation has put many households under financial pressure, more cardholders are carrying debt from month to month or falling behind on payments. Credit card delinquency rates rose across the board, the New York Fed & TransUnion found. “These are consumers who are struggling to afford their everyday expenses,” said Charlie Wise, senior VP of global research & consulting at TransUnion. “They’re trying to keep the house of cards from collapsing.” “Not only are balances higher but the cost of debt service on those cards is significantly higher,” Wise added. Credit card rates spiked more than 5% with the Federal Reserve's recent string of 11 rate hikes, including 4 in 2023. Since most credit cards have a variable rate, there's a direct connection to the Fed's benchmark. As the federal funds rate rose, the prime rate did, as well & credit card rates followed suit. The average annual percentage rate is now more than 20%, also an all-time high. A minimum payment toward this average credit card balance would take you more than 17 years to pay off the debt & cost more than $9063 in interest, Bankrate calculated. “Basically, for every person who’s using credit cards for convenience and to earn cash back and travel rewards without paying interest, there’s someone else who’s carrying a very expensive balance,” said Greg McBride, chief financial analyst at Bankrate.
Average credit card balances top $6,000, a 10-year high
Treasury yields rose as investors looked to economic data & comments from Federal Reserve officials for clues about what could be on the horizon for the economy. The 10-year Treasury yield was up by over 3 basis point at 4.543% & the 2-year Treasury yield rose 2 basis points to trade at 4.959%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. When the Fed left interest rates unchanged last week, the possibility of further interest rate hikes was not taken off the table & Fed Chair Jerome Powell noted that rate cuts were not yet being considered. That left many investors with questions about how long interest rates could stay elevated & if a recession is likely to hit the US economy or the Fed is anticipating a soft landing. They are hoping to find clues in comments from Fed speakers this week as little key economic data is expected to be published. Elsewhere, weekly initial jobless claims showing a slight decline offered fresh hints about the state of the labor market & whether it is cooling as recent jobs data has suggested. That would indicate that the Fed's monetary policy approach of higher interest rates is taking hold & having the desired effect.
10-year Treasury yield rises as investors weigh economic outlook
Investors are keeping an eye on Federal Reserve policymakers for more clues to interest rate strategy. Dow began trading in the red, but buyers brought it back around even. High interest rates are doing what the Fed wants, slowing the economy. But that hurts investors over the short term. Powell may let slip some clues to the chance of a rate cut when he speaks later today.
Dow Jones Industrials
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