Markets meander as Treasury yields dip after Fed hawkish comments

Dow climbed 141, advancers over decliners better than 2-1 & NAZ was up 11.  The MLP index dipped 1+ to the 258s & the REIT index rose 4+ to the 374s.  Junk bond funds continued mixed & Treasuries remained in demand, lowering yields after the big advance this week.  Oil rose to the 73s & gold gained 9 to 2052 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Americans are increasingly turning to their credit cards to cover everyday expenses, with debt hitting a new record high at the end of Dec, according to a New York Federal Reserve report.  In the 3-month period from Oct - Dec, total credit card debt surged to $1.13T, an increase of $50B (4.6%) from the previous qtr.  It marks the highest level on record in Fed data dating back to 2003 & the 9th consecutive annual increase.  There was also an uptick in borrowers who are struggling with credit card, student & auto loan payments.  As of Dec, about 3.1% of outstanding debt was in some stage of delinquency, up from the 3% recorded the previous qtr but still down from the average 4.7% rate seen before the COVID-19 pandemic began.  "Credit card and auto loan transitions into delinquency are still rising above pre-pandemic levels," said Wilbert van der Klaauw, economic research advisor at the New York Fed.  "This signals increased financial stress, especially among younger and lower-income households."  Credit card delinquencies continued to rise from their pandemic-era lows in the 4th qtr. The flow of debt moving into delinquency hit 8.5% in the 4th qtr at an annualized rate, compared with an 8.01% uptick during the 3rd qtr & 5.87% one year ago.  The increase was most pronounced among individuals between the ages 30-39.  "It's maybe not a flashing red signal, but something that is indicative of a slight weakening in household balance sheets that is consistent with a slowdown in consumption as 2024 moves on, and a little bit of a retrenchment by the consumer," New York Fed researchers said.  There are likely several reasons to blame for the rise in delinquencies among younger Americans.  New York Fed researchers said the increase could reflect the resumption of student loan payments or indicate that this cohort overextended themselves financially when they were receiving stimulus payments during the pandemic.  "That combined with student debt and the fact that they also experienced a recession, even though it was very short," researchers said.  "It can still be disruptive for people's careers, especially early in their careers."  The rise in credit card usage & debt is particularly concerning because interest rates are astronomically high right now.  The average credit card annual percentage rate (APR) hit a new record of 20.7% last week, according to a Bankrate database that goes back to 1985.  The previous record was 19% in 1991.

Credit card debt smashed another record high at the end of 2023

Bolts appeared to have been missing from a door plug that blew out midair on Boeing 737 Max 9 operated by Alaska Airlines (ALK) last month, according to a preliminary report from the National Transportation Safety Board.  The Jan 5 blowout left a gaping hole in the side of the fuselage as the plane full of passengers climbed out of Portland, Oregon.  The accident prompted a grounding of the Max 9 by the Federal Aviation Administration for much of last month.  The preliminary report into Flight 1282 places the squarest blame on Boeing (BA), a Dow stock,& provides the most detail yet about what went wrong before the aircraft was handed over to ALK late last year.  BA CEO Dave Calhoun, under pressure to address manufacturing defects that have delayed aircraft deliveries, has said the company is responsible for what went wrong.  “We caused the problem,” Calhoun said on Jan 31.  “Over these last few weeks, I’ve had tough conversations with our customers, with our regulators, congressional leaders and more. We understand why they are angry, and we will work to earn their confidence.”  The FAA is also auditing BA's production lines & last month said it would stop BA from increasing production of the best-selling Max jet beyond the current 38 a month it is producing until regulators are satisfied with its production processes.  The accident occurred just as BA was trying to ramp up output.  BA stock rose 1.89.

Bolts appeared to be missing from Boeing 737 Max door plug .81.that blew off midflight, NTSB says

The US saw a significant rise in corp bankruptcies last year, with the health care industry hardest hit.  Debtwire's latest Restructuring Insights report found bankruptcy filings jumped 58% in 2023, climbing from 179 in 2022 to 282.  Bankruptcies in the health care sector soared 117%, representing 21% of all cases.  The analysis pointed to cases like Envision Healthcare, which sought bankruptcy protection after accumulating some $9.4B in debt & Aukumin, which owed $1.3B when it went belly-up.  Catherine Corey, Debtwire's global head of restructuring data, said those major cases "defined the restructuring landscape last year, highlighting persistent challenges in the healthcare sector."  "Declining patient numbers, inadequate reimbursement rates from Medicare and Medicaid, and staffing shortages with demands for higher wages fueled the industry’s financial struggles,"  Corey said.  After health care, the real estate industry saw the 2nd-highest number of filings, representing 11% of the total.  The largest case was Chinese real estate behemoth Evergrande, which filed for Chapter 15 bankruptcy protection in a Manhattan court last summer, its $38.8B filing dwarfed all others in the report.  Another real estate company highlighted in the report was long-suffering office-sharing giant WeWork, which also filed for bankruptcy last year in a stunning fall from grace.  It had once been valued at an estimated $47B.  "The 58% spike in bankruptcies in 2023 signaled a major shift in lenders' attitudes, unwilling to prolong support for struggling companies," Corey said.  "A convergence of challenges, including the post-pandemic withdrawal of government support, inflation, rising interest rates, supply chain disruptions, global unrest, and stricter lending requirements, created a perfect storm."

Business bankruptcies surged 58% in 2023

Gold closed with a gain as treasury yields & the $ eased.  Gold for Apr closed up $8 to settle at $2051 per ounce.  The rise comes as treasury yields move lower after rising sharply following last week's US jobs report that showed robust employment growth, renewing worries a strong economy will keep inflation above the Federal Reserve's 2% target & prevent the central bank from quickly lowering interest rates.  The yield on the 2-year note was last seen paying 4.383%, down 9.1 basis points, while the yield on the 10-year note was down 6.7 basis points to 4.094%.  The ICE dollar index was last seen down 0.27 points to 104.18.

Gold Closes Higher as the Dollar and Treasury Yields Move Lower

West Texas Intermediate (WTI) crude oil closed higher, climbing for a 2nd day as the Energy Information Administration said it sees oil inventories falling in the current qtr on OPEC+ cuts & US production will drop from record levels.  WTI crude oil for Mar closed up 53¢ to settle at $73.31 per barrel, while Apr Brent crude, the global benchmark, closed up 60¢ to $78.59.  In its influential monthly Short-Term Energy Outlook, the agency said it sees inventories dropping by 0.8M barrels per day during the current qtr, supporting prices.  As well, it sees US oil production dropping off a record.  Production is expected to return to almost 13.3M b/d in Feb but then decrease slightly thu the middle of 2024 & will not exceed the Dec 2023 record until Feb 2025.  Oil has returned to a narrow price range as demand worries led by a weakening Chinese economy are offset by geopolitical risk on violence in the Middle East.  China has yet to respond to an order issued by a Hong Kong court for the liquidation of Evergrande Group, the country's largest real-estate developer, which as failed to restructure more than $300B of debt.  Crude oil prices registered modest gains on yesterday despite a hawkish macro narrative gripping market, as geopolitical angst continued.  Oil, however, remains range-bound amid no supply disruptions seen with focus today on EIA's short-term energy outlook.

WTI Crude Oil Closes Higher as the EIA Sees Falling Inventories and Lower US Oil Production

Powell's repeated warnings that the Fed will have to move cautiously when raising rates is something investors will have to adjust to.  Unfortunately, some have gotten addicted to low rates & will find this change difficult to accept.

Dow Jones Industrials