Markets slide as investors weigh disappointing inflation data

Dow was up 15 (about 300 above early lows), decliners over advancers about 3-2 & NAZ rose chump change.  The MLP index hardly budged in the 255s & the REIT index pulled back 4+ to the 388s.  Junk bond funds inched higher & Treasuries saw buying which lowered yields.  Oil was up fractionally to the 72s but below early highs & gold added 4 to 2032 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Mortgage rates rose a bit for the 2nd week in a row while home prices remain high & many buyers are still waiting for costs to come down before making a move.  Still, an increase in demand has some economists shining cautious optimism on the housing market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate for the benchmark 30-year fixed mortgage nudged up to 6.66% this week, an increase from 6.62% last week.  The popular note averaged 6.33% a year ago.  At the same time, the rate on the 15-year fixed mortgage edged lower for a 2nd straight reading, averaging 5.87% after coming in last week at 5.89%.  One year ago, the rate on the 15-year fixed note averaged 5.52%.  "Mortgage rates have not moved materially over the last three weeks and remain in the mid-six percent range, which has marginally increased homebuyer demand," said Sam Khater, Freddie Mac's chief economist.  "Even this slight uptick in demand, combined with inventory that remains tight, continues to cause prices to rise faster than incomes, meaning affordability remains a major headwind for buyers," Khater added.  "Potential homebuyers should look closely at existing state and local resources, such as down payment assistance programs, which can considerably help defray closing costs."  The Mortgage Bankers Association's (MBA's) index of mortgage applications rose 9.9% for last week, compared with one week earlier.  "2024 started strong, with gains in both refinance and home purchase applications leading to a 10 percent jump in overall activity for the week," said MBA Pres & CEO Bob Broeksmit.  He added, "With rates expected to remain below 7 percent for the foreseeable future, MBA anticipates renewed activity in the housing market heading into the spring, especially if housing supply continues to rise."

Mortgage rates climb for second straight week

The US gov ran up another ½ a T$ in red ink in the first qtr of its fiscal year, the Treasury Dept reported.  For the period from Oct 2023 - Dec 2023, the budget deficit totaled just shy of $510B, following a shortfall of $129.4B in just Dec alone, which was 52% higher than a year ago.  The jump in the deficit pushed total gov debt past $34T for the first time.  Compared to last year, which saw a final deficit of $1.7T, 2024 is running even hotter.  In the first qtr of fiscal 2023, for example, the difference between spending & receipts totaled $421B.  On an unadjusted basis, that's an increase of $89B between fiscal 2024 & last year.  Adjusted for calendar factors, the Treasury Dept said the change between the 2 years is actually $97B.  Dec's shortfall was higher by more than $34B compared to the previous year, driven by higher Social Security payments & interest costs.  If the current pace continues, 2024 would end with a deficit of just more than $2T.  The deficit has continued to pile up despite the Biden administration's assurances that the Inflation Reduction Act, in addition to reducing prices, would shave “hundreds of billions” off the deficit.  While the rate of inflation has come down, Labor Dept data today showed the consumer price index increased another 0.3% in Dec, pushing the 12-month rate up to 3.4%, higher than the forecast & above the Federal Reserve's 2% goal.  With interest rates elevated as the Fed fights inflation, financing costs for the gov in 2023 totaled nearly $660B.  Debt as a percentage of GDP rose to 120% in the 3d qtr of 2023.

U.S. deficit tops half a trillion dollars in the first quarter of fiscal year

Iran captured an oil tanker previously involved in a US-Tehran dispute over carrying US-sanctioned crude, Iranian state media said.  The Iranian navy seized the vessel St Nikolas in the Gulf of Oman, the state-run Islamic Republic News Agency said, after it surrendered Iranian crude to US authorities following allegations of sanctions violations.  Iran says this forfeiture was actually theft.  Earlier today, the UK Marine Trade Operations said an unnamed tanker was boarded by armed individuals near the Gulf of Oman & appeared to change course toward Iranian waters.  The UKMTO reported on social media that an unnamed ship was boarded by 4 or 5 unauthorized people early today at 50 nautical miles east of Sohar, Oman.  Communication with the vessel was lost & the ship altered course toward Iranian waters, the UK agency said.  TankerTrackers.com identified the vessel as the St Nikolas, previously known as the Suez Rajan.  A media spokesperson for Empire Navigation, which manages the St Nikolas, said that the vessel was en route to the Turkish port Aliaga after loading crude from the Iraqi Basrah Oil Terminal & was staffed by 18 Philippine & one Greek crew members.  The St Nikolas has previously been involved in a dispute between Iran & the US.  In Oct, Empire Navigation said it had resolved a violation of US sanctions with the Dept of Justice, which determined that the vessel, then known as Suez Rajan, loaded sanctioned Iranian oil between Jan & Feb 2022 thru a ship-to-ship transfer near Singapore.  As part of the fallout, Empire Navigation transported the sanctioned cargo to Houston, where it could be forfeited to the DOJ.  Today's incident is the latest in a series of Red Sea attacks, with Yemen’s Iran-backed Houthi movement targeting commercial vessels & compounding the maritime risk of a high-traffic trade route.  The Houthis say they are carrying out their activity in retaliation for Israel's war in the Gaza Strip.

Red Sea crisis could jeopardize inflation fight as shipping costs spike globally

Gold settled lower, giving up early gains as the $ rose after the US reported inflation ran hotter than expected in Dec.  Gold for Feb closed down $8 to settle at $2019 per ounce, after earlier touching $2056.  US core inflation, excluding volatile food & energy, rose 3.9% last month, down from 4% in Nov but above expectations for a 3.8% rise.  The headline consumer price index rose 0.3%, also above expectations for a 0.2% rise.  The $ rose following the report on concerns the Federal Reserve may delay expected interest-rate cuts as inflation remains above its 2% target.  The ICE dollar index was last seen up 0.14 points to 102.49.  Treasury yields also climbed after the CPI release, with the 2-year note last seen paying 4.308%, down 5.4 basis points & the yield on the 10-year note was down 1.7 basis points to 4.017%.

Gold Closes Lower on a Higher Dollar as US December Inflation Tops Expectations

West Texas Intermediate (WTI) crude oil closed higher as geopolitical worries over potential Middle East supply disruptions after Iran seized a tanker in the Gulf of Oman, though demand concerns continue.  WTI crude for Feb closed up 65¢ to settle at $72.02 per barrel, while Mar Brent crude, the global benchmark, was last seen up 64¢ to $77.44.  Reports say Iran boarded & seized the St Nikolas tanker in the waters between it & Oman on a court order.  The ship had been the focus of US attention when it was accused of illegally smuggling Iranian crude oil despite sanctions & its owner was subject to a $2.4M fine levied by the US Justice Dept.  The seizure follows on the largest to date attack on Red Sea shipping by Iran-backed Houthi militants yesterday that was repelled by UK & US naval forces.  The missile & drone attacks pushed prices higher until the Energy Information Administration reported US oil inventories unexpectedly rose last week and stocks of refined products swelled.

WTI Crude Oil Closes Higher After Iran Seizes a Tanker in the Gulf of Oman

The Red Sea continues to be very active & the goings on there can have a major impact on oil.  Its price is around multi year lows.  Attention by investors is watching the Fed for a rate cut in Mar.  However that is 3 months away, a long time when there will be a lot happening.  Dow is up all of 22 YTD.

Dow Jones Industrials