Markets sputter, looking for direction as interest rates rise

Dow finished up only 10 (close to session low), advancers over decliners 5-4 & NAZ lost 81.  The MLP index was steady in the 256s & the REIT index closed very near yesterday's in the 389s.  Junk bond funds hardly budged & Treasuries continued to be sold, increasing yields.  Oil was fractionally lower to 72 & gold gained 9 to 2052 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Ford (F) said that it sold almost 2M vehicles in the US in 2023, its best number since 2020.  That sales figure marked a 7.1% increase from 2022, when the automaker posted 1.86M in US sales.  Ford touted the sales performance of its F-Series trucks, which saw a year-over-year jump of 15% in 2023.  Annual US sales of the trucks hit 750K.  The F-Series recently celebrated its 47th year in a row as America's best-selling truck, in addition to its 42nd as the best-selling vehicle.  "In a year of challenges, from a labor strike to supply issues, our amazing lineup of gas, electric and hybrid vehicles and our fantastic dealers delivered solid growth and momentum. We have the products that customers want," CEO Jim Farley said.  Ford said hybrid vehicle sales were up 25% for the year & in the 4th qtr, it sold 37K hybrids.  Meanwhile, the automaker said that it sold 73K electric vehicles in 2023, an 18% increase from the prior year.  Its F-150 Lightning& Mustang Mach-E contributed to the growth, with the latter having its best year of sales since the vehicle's launch in 2021.  Ford remains the 2nd-most popular seller of electric vehicles in the US behind Tesla (TSLA).  The stock fell 36¢.

Ford US new vehicle sales climb 7.1%, highest since 2020

A key measure of home-purchase applications slumped over the holidays despite a sharp drop in mortgage rates over the course of Dec.  The Mortgage Bankers Association's (MBA) index of mortgage applications fell 9.4% last week, compared with 2 weeks earlier, according to new data.  The data also showed that the average rate on the popular 30-year loan ended the year at 6.76%.  While that is down from a peak of 8% in Oct, it is slightly higher than it was the previous week.  "Markets continued to digest the impact of slowing inflation and potential rate cuts from the Federal Reserve, helping mortgage rates to stay at levels close to the lowest since mid-2023," said Joel Kan, MBA's deputy chief economist.  "The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response."  Housing demand remained muted even with the recent drop in rates.  Applications for a mortgage to purchase a home dropped 5% from 2 weeks earlier & application volume is down 12% compared with the same time last year.  Demand for refinancing also fell last week, declining 18% from the previous 2 weeks.  Compared with the same time last year, refinance applications are up about 15%.  "The recent decline in rates has given the housing market some cause for optimism going into 2024, but purchase applications have not yet picked up in response," Kan said.  "Refinance applications were still at very low levels, but were 15% higher than a year ago."  The interest rate-sensitive housing market has cooled rapidly in the wake of the Federal Reserve's aggressive tightening campaign.  Policymakers lifted the benchmark federal funds rate 11 consecutive times over the past 2 years in an attempt to crush stubborn inflation & slow the economy.  However, many economists believe the central bank is done raising interest rates, which has helped to bring down painfully high mortgage rates.  Higher rates have not only dampened consumer demand over the past year, but also severely limited inventory.  That is because sellers who locked in a low mortgage rate before the pandemic have been reluctant to sell with rates continuing to hover near a 2-decade high, leaving few options for eager would-be buyers.  "The housing market has been hampered by a limited supply of homes for sale, but the recent strength in new residential construction will continue to help ease inventory shortages in the months in come," Kan added.

Mortgage rates fall nearly 10% — but Americans aren't biting

Economist Alberto Musalem was named the next pres & CEO of the Federal Reserve Bank of St Louis.  Musalem, 55, will start on Apr 2.  He succeeds James Bullard, who joined Purdue University last August.  The St Louis Fed representative is an alternate member of the rate-setting Federal Open Market Committee & will vote in 2025.  St Louis Fed First VP Kathy O’Neill has been holding the position in the interim.  “Alberto will be an outstanding president and CEO of the St. Louis Fed,” said St Louis Fed director Carolyn Chism Hardy, pres & CEO of Chism Hardy Investments & deputy chair of the bank's search committee.  Hardy cited Musalem's experience as an economist & in financial markets as well as his extensive background with the Fed.  In his most recent work, he served as co-chief investment officer & was co-founder of Evince Asset Management.  Before that, he was exec VP & senior advisor to the New York Fed.  In addition, he has financial market experience at Tudor Investment Corp, working with the firm's founder, a financial titan Paul Tudor Jones.  “Alberto is a mission-focused leader, and I am confident he will work tirelessly to promote a healthy economy for all in representing the diverse views of the constituents across the Fed’s Eighth District,” Hardy said.

St. Louis Fed names former Tudor executive Alberto Musalem as new president

Gold closed with a gain as the $ edged down despite stronger than expected economic data, while treasury yields rose.  Gold for Feb closed up $7 to settle at $2050 per ounce, after closing at a record $2093 on Dec 27.  US initial jobless claims were 202K last week, down from 218K a week early & well under expectations for 219K claims.  Private-sector jobs rose by 164K positions in Dec, according the the ADP Employment report, up from 103K a month earlier & above expectations for a 130K rise.  The $ moved off early lows following the data but remains weaker than yesterday, with the ICE dollar index last seen down 0.09 points to 102.41.  Treasury yields were higher following the data, with the 2-year note last seen paying 4.408%, up 6.7 basis points, while the 10-year note yield was up 8.0 basis points to 4.0%.

Gold Closes Higher on a Weaker Dollar as Yields Climb Following Strong Employment Data

Oil prices fell today.  The West Texas Intermediate for Feb dropped 51¢ ( 0.7%), to settle at $72.19 & Brent crude for Mar decreased by 66¢ (0.84%) to settle at $77.59 a barrel.

Crude Futures Settle Lower

Investors looking for confirmation of bets on a Mar rate cut are getting uncertainty instead.  Many have become addicted to watching every comment made by Fed officials.  With the rise in yields so far this some are getting nervous.  Also, the GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the 4th qtr of 2023 is 2.5% on Jan 3, up from 2.0% on Jan 2.  That is substantially lower than 4.9% in Q3.  Meanwhile safe haven gold remains near its record high.

Dow Jones Industrials