Markets dropped after the inflation report was higher than expected

Dow finished down 137 with buying into the close which trimmed the loss, decliners over advancers about 5-1 & NAZ was off 49.  The MLP index went down 4+ to the 275s  & the REIT index tumbled 6+ to the 379s while interest rates rose.  Junk bond funds remained a little lower & Treasuries continued to be sold, which increased yields (more below).  Oil gained 1+ to the 81s & gold fell 14 to 2166 (more on both below).

AMJ (Alerian MLP Index tracking fund)

Mortgage rates fell for the 2nd week in a row, but economists are not expecting any significant declines in the near future.  Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage dropped to 6.74% this week from 6.88% last week. The average rate on a 30-year loan was 6.60% a year ago & the average rate on the 15-year fixed mortgage also fell to 6.16% after coming in last week at 6.22%.  One year ago, the rate on the 15-year fixed note averaged 5.90%.  "The 30-year fixed-rate mortgage decreased again this week, with declines totaling almost a quarter of a percent in two weeks’ time," said Sam Khater, Freddie Mac's chief economist.  "Despite the recent dip, mortgage rates remain high as the market contends with the pressure of sticky inflation. In this environment, there is a good possibility that rates will stay higher for a longer period of time."  The drop in rates has boosted home-purchase applications leading into the typically bustling spring season, but demand remains well below where it was a year ago as elevated rates & record-high home prices continue to keep buyers and sellers out of the market.  The Mortgage Bankers Association's (MBA) index of mortgage applications jumped 7.1% for last week, compared with a 9.7% increase the previous week, according to new data.  Still, application volume is down 11% compared with the same time last year.  With no relief in sight from mortgage rates or soaring home prices, the housing affordability crisis appears to be set in, for now.  That leaves potential home buyers weighing their options.  "As the spring heats up, some buyers may hold off in the hopes that mortgage rates move lower, but either choice (buying now or waiting) comes with tradeoffs," said Realtor.com senior economic analyst Hannah Jones.  "Spring buyers may see higher mortgage rates, but summer buyers are likely to see higher home prices, and uncertainty around mortgage rates," Jones added.

Mortgage rates dip for second week, but no major drops expected soon

Treasury yields climbed after hotter-than-expected wholesale inflation report worried traders about its potential impact on Federal Reserve policy going forward.  Yields on the 10-year Treasury note rose about 10 basis points to 4.29%, while the 2-year Treasury  yield was last at 4.69%, up about 6.9 basis points.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  The producer price index rose 0.6% in Feb.  Core PPI, which strips out food & energy, gained 0.3%.  The forecast expected an increase of 0.3% for the headline number & a 0.2% advance for core PPI.  It marks the last major data release before the Fed's meeting Mar.  Investors are widely expecting interest rates to be left unchanged, but are looking for fresh hints as to when rate cuts might begin and how many are likely this year.  Policymakers have said they are looking for further evidence that inflation is returning to the central bank’s 2% target range before making any moves in monetary policy.  Earlier this week, the consumer price index for Feb also came in slightly higher than expected, rising 0.4% on a monthly basis & 3.2% from a year earlier.

Treasury yields rise after February wholesale inflation turns out hotter than expected

The number of Americans applying for jobless benefits last week inched up but largely stayed at historically low levels as the labor market continues to thrive despite elevated interest rates.  The Labor Dept reported that filings for unemployment claims for last week ticked down by 1K to 209K from the previous week’s 208K.  The 4-week average of claims, which evens out some of the weekly volatility, came in at 208K a decrease of 500 from the previous week.  In total, 1.81M Americans were collecting jobless benefits during the latest week, an increase of 17K from the previous week.  Last week's number, which had been the most since Nov, was revised down by 112K.  Weekly unemployment claims are considered a proxy for 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.  Though layoffs remain at low levels, there has been an uptick in job cuts recently, mostly across technology & media.

Number of Americans filing for jobless benefits remains low in a thriving loabor market

Gold prices settled lower as the $ & bond yields climbed as yet another US inflation measure ran hotter than expected last month.  Gold for Apr closed down $13 to settle at $2167 per ounce.  The drop comes after the Bureau of Labor Statistics reported the US Producer Price Index rose 1.6% annualized in Feb, up from a revised 1% rate in Jan & well ahead of expectations for a 1.1% rise, while the core rate rose 0.3% from Jan, ahead of the consensus estimate for a 0.2% rise.  The report is the latest to show US inflation is not quickly returning to the Federal Reserve's 2% target after the Consumer Price Index rose more than expected last month.  The data is dashing hopes for speedy rate cuts from the central bank, whose policy committee will meet next week with no change to current rates expected.  The $ rose following the data, with the ICE dollar index was last seen up 0.56 points to 103.35.  Treasury yields also climbed, bearish for gold since it offers no interest & the 2-year note was last seen paying 4.702%, up 6.1 basis points, while the yield on the 10-year note was up 10.5 basis points 4.299%.

Gold Closes With a Loss as the Dollar and Yields Climb as Another US Inflation Measure Rose More than Expected

West Texas Intermediate (WTI) crude oil closed at a 4-month high after the Intl Energy Agency (IEA) raised its 2024 oil-demand forecast, cut its supply outlook & said it expects global inventories to tighten for the entire year due to continuing production cuts from OPEC+.  WTI crude oil closed up $1.54 to settle at $81.26 per barrel, the highest since Nov 6, while May Brent crude, the global benchmark, was last seen up $1.47 to $85.50.  In its influential Monthly Oil Market Report, the IEA raised its 2024 demand forecast to 1.3M barrels above 2023 levels, an increase of 110K bpd from its Feb outlook, while seeing only a 0.8M barrels per day rise in global oil production due to the 2.2M  bpd voluntary production cuts from OPEC+ that the cartel extended to the end of the 2nd qtr & the agency assumes will continue thru year end.  If the cuts continue through 2024, global inventories will fall thru the year, but could begin to rise if lifted at the end of Jun.  The agency's demand forecast is near an estimate from the Energy Information Administration's outlook for a 1.43M bpd rise in 2024 demand released earlier this week, while OPEC said it expects demand to climb by 2.25M bpd.  However gains from the IEA's bullish forecast could be limited after another US inflation measure ran hotter than expected last month. The Producer Price Index rose 1.6% annualized in Feb, up from a revised 1% rate in Jan & well ahead of expectations for a 1.1% rise, while the core rate rose 0.3% from Jan, ahead of the consensus estimate for a 0.2% rise.

WTI Closes Higher as the IEA Says Global Inventories Likely to Tighten This Year after OPEC+ Extended Cuts

The dreary news about the rise in inflation & drab retail sales sunk in during the PM & that brought on selling.  Rate cuts are months (maybe many months) away which scared investors.  In addition, thoughts about a possible recession are around & have more credibility.  During the last 4½ months Dow has risen from 32K to about 39K (see below).  The stock market needs a rest after its long rally.

Dow Jones Industrials