Dow rose 41, advancers over decliners 2-1 & NAZ jumped 157. The MLP index was flattish in the 251s & the REIT index added 2 to the 375s. Junk bond funds were little changed & Treasuries had limited selling, raising yields (more below). Oil recovered chump change after yesterday's big decline & gold slid back 2 to 2045.
AMJ (Alerian MLP Index tracking fund)
The Treasury 10-year yield rose as investors considered the state of the labor market & broader economy ahead of Fri's all-important jobs report. The yield on the 10-year Treasury was up by over 2 basis points at 4.148% & it had dipped as low as 4.117% yesterday, which marked its lowest level since early Sep. The 2-year Treasury yield was last down by nearly 2 basis points at 4.586%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. Investors looked to economic data for hints about the state of the labor market & signals about what the Federal Reserve's interest rate policy outlook may look like. At the same time, they are readying for tomorrow's key data on nonfarm payrolls, the unemployment rate & wages. Yesterday, ADP's employment change report indicated that private payrolls rose by 103K in Nov, fewer than the 128K previously expected. This was the 2nd set of data released this week that hinted at a cooler labor market, with the Job Openings & Labor Turnover Survey previously showing that openings sharply declined in Oct with 8.7M, which was also far lower than anticipated. Weekly jobless claims released today were below expectations & a reading of continuing jobless claims declined, indicating that the pace of layoffs hasn't increased.
10-year Treasury yield rebounds from September low as traders await key jobs data
This year was the least affordable year for homebuying in at least in the past 11 years, according to a a report from real estate company Redfin. In 2023, someone making the median income in the US, $78K, would've had to spend more than 40% of their income on monthly housing costs if they bought the median-priced home, which was around $400K, according to Redfin, the highest share in Redfin's records dating back to 2012, up nearly 3% from last year. Monthly costs for homebuyers have increased more than twice as fast as wages. The 30-year fixed mortgage rate hit 8% in Oct, the first time since 2000, combined with a decrease in house listings on the market. This past year, a typical homebuyer had to earn an income of at least $110K if they wanted to spend a maximum of 30% of their income on monthly housing payments for a median-priced home. Redfin reported that record high is up 8.5% from last year & $30K more than the typical household income. Looking to 2024, Redfin predicts that mortgage rates will fall to about 6.6% & prices will drop 1% as new listings find their way onto the market. “A perfect storm of inflation, high prices, soaring mortgage rates and low housing supply caused 2023 to go down as the least affordable year for housing in recent history,” Redfin Senior Economist Elijah de la Campa said. “The good news is that affordability is already improving heading into the new year.”
2023 was the least affordable homebuying year in at least 11 years, Redfin says
Christmas bonuses could be on the chopping block at small businesses around the US this holiday season as persistent inflation may play the role of the Grinch, according to a new survey. The Nov edition of the Freedom Economy Index, a joint project of PublicSquare & RedBalloon, surveyed small business owners & found that 42% of business owners who traditionally give Christmas bonuses to their employees said they can't afford them this year. Another 28% of business owners surveyed said they plan to provide Christmas bonuses that will be smaller than in past years. About 25% said Christmas bonuses will be about the same as past years, while roughly 5% said bonuses will be bigger this year relative to prior years. About 52% of retail business owners who responded to the survey said their Black Friday & Christmas sales were "much slower" than average, while about 20% each said sales were about average or slightly less than average. Persistent inflation played a key role in the challenges facing business owners. While inflation has come down from the 40-year high of 9.1% in Jun 2022, it remained at 3.2% in Oct, well over the Federal Reserve's 2% target, despite the Fed raising interest rates to their highest level in 2 decades to tamp down rising prices. The survey asked business owners how inflation impacts their bottom lines, with over 81% of respondents saying their suppliers' prices have increased in the last 30 days, an increase from 76% in Oct. It also found that about 91% of business owner respondents expect that "inflation will continue to be higher than normal" over the next 6 months, an increase from 87% in Oct. The survey also found that owners' optimism about their businesses rose slightly in Nov to 31%, up from 28% in Oct, while pessimism decreased to 47.8% from 55.1% from the prior edition of the survey, though both shifts remained within the margin of error. Overwhelmingly, business owners surveyed expressed concern about the economic outlook – 81% of respondents said a major recession is looming while 94% said the US is on the wrong track. Respondents to the survey also provided explanations about how inflation is impacting their business, with several expressing concern about their ability to remain in business with rising costs & stay competitive with rivals given the need to raise prices. The Freedom Economy Index survey also asked those surveyed about what their biggest current need is as a business. A 31% plurality said that "more economic stability" is what they’re hoping for to help their business, while another 23% said that "reduced inflation" is on their Christmas wishlist.
Small business owners are not happy with the economy according to the survey above. They feel changes. The strong number for GDP growth in Q3 was helped by temporary factors which will not be repeated in Q4 when GDP growth is expected to be a modest 1%. Nov's stock rally is cooling this month.
Dow Jones Industrials
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