Markets climb as Treasury yields settle back marginally

Dow went up 348 (session high), advancers over decliners more than 4-1 & NAZ rose 47.  The MLP index jumped 5+ to the 266s & the REIT index advanced 7+ to 380.  Junk bond funds were in demand & Treasuries continued to see limited buying, reducing yields.  Oil was up 1+ to the 78s (a more than 3 month high) & gold added 12 to 2016 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Mortgage rates rose again this week, spelling further bad news for weary would-be buyers & sellers as housing inflation continues to surge.  Freddie Mac's latest PrimarMeanwhile, many homeowners interested in moving are opting to stay put, because of the financial disincentive of taking on a significantly higher mortgage rate than they currently have.  The rate on the 15-year fixed mortgage also increased, averaging 6.12% after coming in last week at 5.9%.  One year ago, the rate on the 15-year fixed note averaged 5.51%.   At the same time, home prices continued to climb, edging out further prospective buyers as they are increasingly priced out of the market.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate for the benchmark 30-year fixed mortgage climbed to 6.77% this week, up from 6.64% last week.  The 30-year average rate was 6.32% a year ago.  The rate on the 15-year fixed mortgage also increased, averaging 6.12% after coming in last week at 5.9%.  One year ago, the rate on the 15-year fixed note averaged 5.51%.  At the same time, home prices continued to climb, edging out further prospective buyers as they are increasingly priced out of the market.  The Mortgage Bankers Association's (MBA) index of mortgage applications fell 2.3% for the week ended Feb 9, compared with the previous week, according to new data.  Meanwhile, many homeowners interested in moving are opting to stay put, because of the financial disincentive of taking on a significantly higher mortgage rate than they currently have.  Realtor.com senior economic research analyst Hannah Jones said now that a Federal Reserve interest rate cut looks unlikely in Mar, mortgage rates are expected to continue to hover in the mid-6% range as they have for several weeks.  Buyer activity tends to pick up in the spring, & if that happens without a material drop in mortgage rates, the increase in demand could make the affordability crisis even worse.  "Many homeowners still feel locked-in by elevated mortgage rates," Jones added, "which could lead to upward pressure on prices if buyer demand picks up faster than seller activity."  But there are signs that home purchase demand could remain weak.  "The economy has been performing well so far this year and rates may stay higher for longer, potentially slowing the spring homebuying season," Freddie Mac chief economist Sam Khater said.  "According to our data, mortgage applications to buy a home so far in 2024 are down in more than half of all states compared to a year earlier."

Mortgage rates climb again as high housing costs persist

Shares of Shake Shack (SHAK) surged after the burger chain delivered strong 4th-qtr earnings results.  For the last 3 months of 2023, SHAK reported a net income of $6.8M, up from a loss of $8.1M the year prior.  EPS increased to a 15¢ profit from a 20¢ loss during the year-ago period.  Adjusting for one-time items, EPS was 2¢.  The burger chain also saw a 20% increase in revenue year over year & opened 15 new restaurants during the qtr.  For 2024, SHAK expects to grow total revenue by 11% to 15% & open 80 new restaurants, which would bring the total, including company-owned & licensed, to nearly 600 locations, more than double the footprint 5 years ago.  “We ended the year on a high note, with positive traffic in the fourth quarter through the success of our sales-driving strategies and continued margin expansion,” CEO Randy Garutti said in a letter to shareholders.  “Our leadership teams are energized and excited as we embark on our 2024 Strategic Priorities and target another year of strong growth and margin expansion.”  The stock skyrocketed 20.33 (26%).

Shake Shack stock surges 20% on fourth-quarter profit, strong 2024 outlook

Fewer Americans filed for jobless claims last week as the labor market continues to show resilience in the face of elevated interest rates intended to cool economic growth in the US.  Applications for unemployment benefits fell by 8K to 212K for the week ending Feb 10, the Labor Dept.  The 4-week average of claims, which quiets some of the week-to-week noise, rose to 218K, up from 212K the previous week.  Weekly unemployment claims are seen as a proxy for the number of US layoffs in a given week.  They have remained at extraordinarily low levels despite efforts by the Federal Reserve to cool the economy.  The Federal Reserve raised its benchmark rate 11 times beginning in Mar of 2022 in an effort to bring down the 4-decade high inflation that took hold after the economy roared back from the COVID-19 recession of 2020.  Though inflation has eased considerably in the past year, the Labor Dept reported earlier this week that consumer prices remain well above the Fed's 2% target.  The Fed has left rates unchanged at its last 4 meetings.

US Applications for Jobless Benefits Fall as Labor Market Continues to Show Resilience

Gold futures rose as the $ continued to ease after jumping on Tues after a report showed US inflation rose more than expected in Jan.  Gold for Apr closed up $10 to settle at $2014 per ounce.  The rise came as the $ weakened even as the US reported initial jobless claims last week fell to 212K, down from 218K last week & below expectations for 220K new claims.  The report is the latest to show the US economy continues to run hot despite high interest rates, dashing hopes for a quick cut to rates from the Federal Reserve.  The ICE dollar index was last seen down 0.38 points to 104.34, after rising to 104.96 on Tues.  Treasury yields also waned, with the 2-year note last seen paying 4.553%, down 3.3 basis points, while the yield on the 10-year note was down 2.9 basis points to 4.223%.

Gold Closes Higher as the Dollar and Treasury Yields Drop Despite Fewer than Expected New Jobless Claims

West Texas Intermediate (WTI) crude oil closed higher, rising off early weakness after the Intl Energy Agency (IEA) said new supply is likely to rise above demand this year, pushing inventories higher, as investors chose to add risk amid a falling $ & bearish economic data.  WTI crude oil for Mar closed $1.39 to settle at $78.03 per barrel, while Apr Brent crude the global benchmark, was last seen up $1.25 to $82.85.  The rise came as investors looked to add risk as the $ & treasury yields weakened, bidding up equities, oil & metals even as a number of economic reports, including initial jobless claims, industrial production & retail sales, came in under expectations.  In its influential monthly Oil Market report, the IEA said "global oil demand growth is losing momentum" even as production rises.  The agency left its 2024 demand forecast mostly steady at 1.2M barrels per day over 2023 demand, which rose 2.3M bpd over 2022 levels.

WTI Oil Closes Higher Even as the IEA Sees Oil Supply Rising Above Demand in 2024

Comments from Federal Reserve officials have played down the latest data which helped soothe nerves.  But nervous investors are still wondering about the latest rout.  The 10 year Treasury yield at 4.24% is near a 2 month high.  Tomorrow brings the Jan reading for the Producer Price Index.

Dow Jones Industrials