Dow rose 130, advancers over decliners better than 2-1 & NAZ advanced 241. The MLP index was off 1 to 280 after its latest rally & the REIT index was little changed in the 387s. Junk bond funds fluctuated & Treasuries remained flattish with little changes in yields. Oil was off fractionally to the 78s & gold added 9 to 2167 for another record (more on both below).
AMJ (Alerian MLP Index tracking fund)
U.S. job openings barely changed in January but remained elevated, suggesting that the American job market remains healthy. The Labor Dept reported that US employers posted 8.86M job vacancies in Jan, down slightly from 8.89M in Dec & about in line with expectations. Layoffs fell modestly, but so did the number of Americans quitting their jobs, a sign of confidence they can find higher pay or better working conditions elsewhere. Job openings have declined since peaking at a record 12M in Mar 2022 as the economy roared back from COVID-19 lockdowns. But they remain at historically high levels: Before 2021, monthly openings had never topped 8M. The US economy has proven surprisingly resilient despite sharply higher interest rates. To combat resurgent inflation, the Federal Reserve raised its benchmark interest rate 11 times between Mar 2022 & Jul 2023, bringing it to the highest level in more than 2 decades. Higher borrowing costs have helped bring inflation down. Consumer prices rose 3.1% in Jan from a year earlier, down from a year-over-year peak of 9.1% in Jun 2022 but still above the Fed's 2% target. Employers have added a robust average of 244K jobs a month over the past year, including 333K in Dec & 353K in Jan.
US Job Openings Stay Steady at Nearly 8.9 Million in January, a Sign Labor Markets Remains Strong
US applications for jobless benefits were unchanged last week, settling at a healthy level as the labor market continues to show strength in the face of elevated interest rates. Unemployment claims for last week were 217K, matching the previous week's revised level, the Labor Dept reported. The 4-week average of claims, a less volatile measure, fell by 750 from the previous week to 212,250. Weekly unemployment claims are broadly viewed as representative of the number of US layoffs in a given week. They have remained at historically low levels since the pandemic purge of Ms of jobs in the spring of 2020. In total, 1.9M Americans were collecting jobless benefits in the prior week, an increase of 8K from the previous week & the most since Nov. The Federal Reserve raised its benchmark borrowing 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. Part of the Fed's goal was to loosen the labor market & cool wage growth, which it believes contributed to persistently high inflation. Many economists thought the rapid rate hikes could potentially tip the country into recession, but that hasn't happened. Jobs have remained plentiful & the economy has held up better than expected thanks to strong consumer spending. US employers delivered a stunning burst of hiring to begin 2024, adding 353K jobs in Jan in the latest sign of the economy's continuing ability to shrug off the highest interest rates in 2 decades. The unemployment rate is 3.7%, & has been below 4% for 24 straight months, the longest such streak since the 1960s.
Jobless claims hold steady at healthy levels
Mortgage rates fell slightly this week after climbing for a month straight, sparking an increase in purchase applications in a housing market that has largely been stalled for months amid sky-high home prices & persistently elevated rates. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.88% this week, down from 6.94% last week & the average rate on a 30-year loan was 6.73% a year ago. The average rate on the 15-year fixed mortgage also fell a bit to 6.22% after coming in last week at 6.26%. One year ago, the rate on the 15-year fixed note averaged 5.95%. "Evidence that purchase demand remains sensitive to interest rate changes was on display this week, as applications rose for the first time in six weeks in response to lower rates," said Sam Khater, Freddie Mac's chief economist. "Mortgage rates continue to be one of the biggest hurdles for potential homebuyers looking to enter the market," Khater added. The Mortgage Bankers Association reported that the decline in rates led to a nearly 10% rise in mortgage applications, while FHA purchase applications jumped 16%. Still, with rates remaining in the high 6% range, many potential buyers & sellers, the vast majority of whom are locked in at rates below 5% are waiting on the sidelines for mortgage rates to come down further before making a move. At the same time, home prices are at an all-time high amid a shortage of homes on the market, continuing to drive an affordability crisis for the housing market.
Mortgage rates dip slightly, boosting demand
Gold closed higher, pushing up to a fresh record for a 5th-straight session as the $ slipped after Federal Reserve chair Jerome Powell said in testimony to Congress he expects interest-rate cuts should begin this year, though his outlook remains cautious. Gold for Apr closed up $7 to settle at $2165 per ounce. In the first of 2 days of congressional testimony Powell disappointed investors hoping for a near-term drop in interest rates, while saying he expects cuts to begin this year if inflation nears the central bank's 2% target. The momentum in gold saw it reach a fresh record high amid weak US economic data & with Powell's remarks being interpreted as mildly dovish, sending the $ & Treasury yields lower. The $ waned, making gold more affordable for intl buyers, with the ICE dollar index last seen down 0.51 points to 102.86. Treasury yields were mixed, with the 2-year note last seen paying 4.535%, down 2.5 basis points, while the yield on the 10-year note was up 1.3 basis points to 4.114%.
Gold Closes at a Record for Fifth-Straight Day as the Dollar Drops After Powell Testimony
West Texas Intermediate (WTI) crude oil closed lower as investors moved to cut risk after Federal Reserve chair Jerome Powell declined to offer a timetable for interest-rate cuts when testifying before Congress, saying only he expected cuts to begin this year. WTI crude oil for Apr closed down 28¢ to settle at $78.93 per barrel, while May Brent crude, the global benchmark, closed unchanged at $82.96. Traders are awaiting the stimulus of lower interest rates to add demand for oil. However in the first of 2 days of congressional testimony, Powell said the central bank is awaiting a sustained move towards its 2% inflation target before agreeing to cut rates. While Powell disappointed markets, stronger than expected demand from China is offering support following Jan & Feb import data, even as the country's real-estate sector remains in a debt crisis.
WTI Crude Oil Closes Lower on Uncertain Outlook for US Interest-Rate Cuts; Chinese Demand Offers Support
Dow had a strong opening, but early enthusiasm diminished later the day. Powell did not provide new insights into the future for interest rates. He stuck to repeating the message that the central bank is in no hurry to ease policy, though he added that rate cuts are likely to come this year. In the meantime they will remain high which at a minimum will pinch the economy. And gold even at record levels remains popular with investors.
Dow Jones Industrials
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