Friday, January 19, 2024

Markets advance after improved consumer confidence

Dow went up 80, advancers over decliners 2-1 & NAZ gained 73.  The MLP index was off 1+ to the 253s & the REIT index was steady in the 379s.  Junk bond funds slid lower & Treasuries had more selling, raising yields.  Oil were bid higher in the 74s & gold added 4 to 2026.

AMJ (Alerian MLP Index tracking fund)

Sales of previously owned homes fell 1% in Dec compared with Nov to a seasonally adjusted annualized rate of 3.78M units, according to the National Association of Realtors (NAR).  Sales were 6.2% lower than in Dec 2022, marking the lowest level since 2010.  Full-year sales for 2023 came in at 4.09M units, the lowest tally since 1995.  Regionally, on a month-to-month basis, sales were unchanged in the Northeast & fell 4.3% in the Midwest.  Sales were down 2.8% in the South but rebounded 7.8% in the West.  On a year-over-year basis, sales were lower in all regions.  The count of home closings is based on contracts likely signed in late Oct.  In Nov, mortgage rates were considerably higher than they are now.  The average rate on the 30-year fixed loan rose to about 8% in Oct before falling to the 7% range in Nov.  It is now at 6.89%, according to Mortgage News Daily.  “The latest month’s sales look to be the bottom before inevitably turning higher in the new year,” said Lawrence Yun, NAR's chief economist.  “Mortgage rates are meaningfully lower compared to just two months ago, and more inventory is expected to appear on the market in upcoming months.”  Inventory fell 11.5% from Nov to Dec, but it was up 4.2% from Dec 2022.  There were 1M homes for sale at the end of Dec, making for a 3.2-month supply at the current sales pace.  A 6-month supply is considered balanced between buyer & seller.  Tight supply continues to reheat home prices.  The median price of a home sold in Dec was $382K, an increase of 4.4% from Dec 2022, the 6th consecutive month of year-over-year price gains.  The median price for the full year was $389K, a record high.  “With rents continuing to ease and more multi-family homes entering the market for rent, investors may continue to tread more cautiously in the housing market,” said Danielle Hale, chief economist at Realtor.com.  “This would mean one less source of competition for potential first-time home buyers who are approaching the 2024 market with optimism despite the challenge of trying to buy a home at a below-median price point, one that investors also often target.”  First-time buyers are still struggling, making up just 29% of Dec sales, down from 31% the year before.  Historically they make up 40% of the market.

December home sales slump to close out worst year since 1995

Macy's (M) said it will cut about 3.5% of its workforce & close 5 of its namesake mall locations as the legacy department store moves to trim costs & turn around slowing sales.  The move will affect approximately 2350 positions across its corp office & stores, company spokesman Chris Grams said.  “As we prepare to deploy a new strategy to meet the needs of an everchanging consumer and marketplace, we made the difficult decision to reduce our workforce by 3.5% to become a more streamlined company,” the company said.  The company notified employees about the layoffs on & the last day for impacted employees will be Jan 26.  CFO & COO Adrian Mitchell hinted that Macy's would take another hard look at its stores.  He said the company had to “deliver relevant products, strong value and a more enjoyable shopping experience,” & some of that would include “optimizing our physical footprint. We are committed to bringing more inspiration on a daily basis to our customers,” he said.  “We look forward to sharing more on how that ladders to long-term profitable growth on our fourth quarter call.”  Mitchell also told investors on the call that Macy's “anticipated closure of less than 10 locations in early 2024.”  The stock fell 57¢.

Macy’s to cut more than 2,300 jobs, about 3.5% of its workforce, and close five stores

Consumers have grown more confident about the direction of the economy & inflation at onset of 2024, despite persistent worries about a looming slowdown, a survey showed.  The University of Michigan's Consumer Survey of Consumers showed a reading of 78.8 for Jan, its highest level since Jul 2021 & up 21.4% from a year ago.  That followed a big jump in Dec & comes despite public opinion surveys showing concern about the nation's direction.  On a 2-month basis, sentiment showed its largest increase since 1991, said Joanne Hsu, the survey's director.  “Consumer views were supported by confidence that inflation has turned a corner and strengthening income expectations,” Hsu said.  “Democrats and Republicans alike showed their most favorable readings since summer of 2021. Sentiment has now risen nearly 60% above the all-time low measured in June of 2022 and is likely to provide some positive momentum for the economy.”  Along with the improved outlook on general conditions, survey respondents displayed more confidence that inflation is coming down.  The outlook for the inflation rate a year from now declined to 2.9%, down from 3.1% in Dec for the lowest reading since Dec 2020.  The Federal Reserve has boosted short-term interest rates to their highest level in more than 22 years & inflation has followed suit lower, though it remains above the central bank's 2% target.  At the same time, the survey's index of current conditions also leaped higher, rising to 83.3, 21.6% higher than a year ago.  Consumer sentiment has improved amid a drop in gasoline prices & solid stock market gains.  The price at the pump for a gallon of regular gas is about 30¢ lower than it was a year ago, according to AAA.

Consumer sentiment surges while inflation outlook dips, University of Michigan survey shows

The consumer confidence survey was encouraging.  But interest rates keep climbing, reflecting worries about the path for rate cuts which makes investors nervous.  Also, activity in the Red Sea is a very dark cloud over the stock market.

Dow Jones Industrials 

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