Markets edge higher as economic data raised hopes for a soft landing

Dow was up 130, advancers over decliners 4-3 & NAZ added 63.  The MLP index was little changed near 251 & the REIT index fell about 1 to the 373s.  Junk bond funds drifted lower & Treasuries remained in heavy demand, raising yields.  Oil continued strong, up almost 2 to the 71s & gold tumbled 30 to 2016 (more on both below).

AMJ (Alerian MLP Index tracking fund)

As interest rates continue to drop, more homeowners are trying to refinance their mortgages.  In the last week of Nov, applications for mortgage refinancing increased by 14% from the week prior, according to the Mortgage Banker Association's Refinance Index.  Compared to the same week last year, they were up 10%.  It’s the first time since 2021 that the number of applications has been on the rise for 2 weeks straight, according to the association.  While overall application levels are still quite low, the recent bump “could signal that 2023 was the low point in this cycle for refinance activity,”  Mortgage Broker Association's deputy chief economist Joel Kan said.  The pickup may be linked to the decline in mortgage rates for the 6th week in a row.  As of Dec 7, the average interest rate for a 30-year mortgage is 7.03, down nearly 10% from the end of Oct, according to federally-insured mortgage provider Freddie Mac.

Demand for mortgage refinancing is up

Inflation may be the Grinch who stole Christmas this year as most Americans say higher prices have led to cutbacks in holiday spending.  A Monmouth University Poll found that 55% of respondents say they are cutting back on their holiday shopping list this year because of high prices.  That's an increase from 46% who said the same last year & 40% in 2021.  The pollster said the trend was reported across all demographic groups, but Americans making less than $50K annually were the largest demographic to report spending cuts.  2/3 of lower income respondents, 67%, said they have cut back holiday spending this year compared to just under ½, 48%, who said the same in 2022.  "The rate of inflation may be slowing but the damage has been done after a long stretch of rising prices," said Patrick Murray, director of the independent Monmouth University Polling Institute.  "There could be a number of reasons why more are cutting back this season," he continued.  "Perhaps those who kept to their usual spending habits as we came out of the pandemic are seeing it catch up with them now. Or maybe their budgets are the same, but they are exchanging fewer gifts or buying for fewer people. Whatever the reason, there is greater pessimism on the holiday gift-giving front."  The Monmouth poll follows Empower's 2023 holiday spending report, which surveyed over 1000 Americans & found 74% say inflation is influencing their holiday spending this year & 31% are working extra hours or taking on a side gig to afford their purchases.  The financial services company found more than 3 in 10 surveyed are cutting back on holiday traditions this year to save money & over ½ are skipping travel this season, with 46% opting to do so to trim costs.  Even though Americans are cutting back on their spending on gifts, that does not mean they're spreading less holiday cheer.  More than 4 in 10 Americans said they will volunteer for charitable activities this holiday season, the poll found.  Monmouth noted these current results are between 5 & 8 points higher than they were in a national poll conducted for US News & World Report magazine nearly 3 decades ago. 

Americans are cutting back on holiday spending, poll finds

A new report from Fidelity Investments found the vast majority of Americans who plan on making a financial resolution for 2024 are shifting their goals due to financial pressures.  Fidelity's 2024 New Year's Resolutions study showed 2/3 of Americans plan on making a financial resolution for the year ahead & of those, 92% said they are adjusting their goals based on the economic conditions over the past few years.  The top concern cited by respondents was inflation, with 40% saying they are worried about the impact of high prices on day-to-day expenses.  The #2 concern was unexpected expenses (37%), followed by economic uncertainty (33%) & not saving enough in an emergency fund (25%).  The Labor Dept's consumer price index showed prices climbed 3.2% on an annual basis in Oct.  While inflation has come down from its 9.1% peak in Jul 2022, the past few years of high inflation has taken a toll on consumers.  Compared with Jan 2021, shortly before the inflation crisis began, prices remain up a staggering 17.62%.  The high cost of living has put significant pressure on household finances & contributed to more Americans dipping into their savings or turning to credit cards to cover everyday expenses.  More than ½ (54%) of those surveyed said they feel overwhelmed by their personal finances, & 31% said they have a stressful relationship with money.  More than 2-in-5 respondents who experienced financial setbacks this year admitted to dipping into their emergency savings & 40% of all respondents said they expect continued financial struggles in 2024 due to higher cost of living.  "With the number of Americans tapping into their emergency savings after a year of financial stressors and setbacks, it’s not surprising to see them look forward to new, brighter chapters in 2024," said Kelly Lannan, senior VP of Emerging Customers at Fidelity Investments.  "Encouragingly, it’s great to see so many taking a practical and confident outlook for the year ahead while they navigate choppy financial waters and fine-tune their financial wellness habits and savings goals," Lannan added.  The most common resolutions for Americans for 2024 are consistent with years past in the 15-year study.  The top goal cited for the year ahead was to save more money (41%), followed by paying down debt (38%) & spending less money (30%).

Fidelity: 92% of savers to alter 2024 resolutions due to financial stress

Gold futures declined, with better-than-expected US jobs data fueling strength in Treasury yields & the $, dulling investor interest in gold & leading prices to post their first weekly loss in a month.  Gold for Dec fell $31 (1.6%) to settle at $2014 an ounce, with prices based on the most-active contract at their lowest finish since Nov 27.  For the week, prices fell 3.6%, marking their first weekly loss since the week ending Nov 10.  The price decline for the precious metal followed the release of a US economic report that suggested the US economy is presently in a pretty good spot.  The number of new US jobs created in Nov rose by 199K, beating the 190K forecast.  The unemployment rate fell to a 4-month low of 3.7% from 3.9%, while average hourly earnings rose by a sharp 0.4%, the largest rise in 4 months.

Gold Prices Post First Weekly Loss in a Month

Oil futures finished higher after a 6-session streak of declines, but marked a 7th weekly loss in a row.  Oil's overall loss highlights how unimpressed traders were with the OPEC+ production cut deal.  It also suggests they aren't particularly optimistic about the global economy next year.  Jan West Texas Intermediate crude fell $1.89 (2.7%) to settle at $71.23 a barrel.  Prices based on the front-month contract lost 3.8% for the week.

Oil Futures Settle Higher After a 6-Session Streak of Losses

Retail business in this holiday season is shaping up as lackluster.  Meanwhile, investors are watching every little piece of information for clues about future cuts in interest rates.  This week the Dow finished about even.

Dow Jones Industrials