Markets pause as Treasury yields rise to multi month highs

Dow fell 84, decliners over advancers 2-1 & NAZ gained 56.  The MLP index was even in the 283s & the REIT index was off 1 to 359.  Junk bond funds fluctuated & Treasuries ran into more selling which raised yields (more below).  Oil slid back to 83 & gold was of 1 to 2340.

AMJ (Alerian MLP Index tracking fund)

Tesla (TSLA) shares surged after CEO Elon Musk said the electric-vehicle company plans to begin production of new affordable EV models by early 2025.  His comments came during TSLA's earnings call after the company reported disappointing first-qtr numbers.  Revenue fell 9% year over year, its steepest annual decline since 2012.  The company previously expected to start production of the new EV models in the 2nd ½ of 2025.  Tesla reported 45¢ in adjusted EPS on $21.3B in revenue, falling short of the 51¢ expected & $22.1B in expected sales.  Revenue dropped from $23.3B a year before & from $25.17B in the previous qtr.  Analysts of Bank of America said that TSLA's first-qtr results & leadership's commentary “addressed key concerns” & “revitalized the growth narrative,” prompting them to upgrade the stock from neutral to buy while maintaining their $220 price target.  They also expressed bullish optimism that TSLA demonstrated a positive business outlook as it prepares to launch new vehicle models & license its driver assistance system.  “In the near-term the tide in news flow appears to suggest the risk to the stock is skewing more positively,” the analysts wrote.  UBS analysts reiterated their neutral rating of TSLA stock & lowered their price target to $147 from $160, saying they remain skeptical of the company's talk.  “Increasingly, TSLA is a play on autonomy, and while progress is being made, we are cautious on near-term viability,” they wrote.  “We see limited growth for current lineup and lack of clarity on what these ‘new vehicles’ could bring.”  The stock jumped 17+ (12%).

Tesla surges after Elon Musk says new affordable EV models coming

Mortgage rates rose for the 3rd straight week last week, hitting the highest level since Nov.  As a result, mortgage application demand dropped 2.7% compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) increased to 7.24% from 7.13%, with points increasing to 0.66 from 0.65 (including the origination fee) for loans with a 20% down payment.  Applications to refinance a home loan, which are most sensitive to weekly moves in interest rates, fell 6% for the week & were 3% higher than the same week 1 year ago.  Applications for a mortgage to purchase a home fell 1% for the week & were 15% lower than the same week one year ago.  As home prices rise along with interest rates, potential buyers' purchasing power are suffering a double whammy.  “Purchase applications declined, as home buyers delayed their purchase decisions due to strained affordability and low supply,” said Joel Kan, MBA's deputy chief economist.  As often happens when affordability takes a hit, the adjustable-rate mortgage share of applications rose last week to 7.6%.  ARMs offer lower rates & can be fixed for up to 10 years, although they are considered riskier.

Mortgage demand drops as interest rates soar over 7%

Treasury yields rose as investors considered the latest economic data & weighed the state of the economy.  The 10-year Treasury yield was last up by 6.6 basis points to 4.664% & the 2-year Treasury yield was last more than four4 basis points higher to 4.946%.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Investors weighed economic data as uncertainty about the state of the economy and how this could affect Federal Reserve monetary policy decisions continued.  The S&P Global Flash manufacturing PMI for the US. came in at a 4-month low of 49.9 for Apr.  Readings below 50 indicate that the sector is contracting.  The data therefore suggested to investors that the economy may be easing slightly.  More economic data is due as the week continues, including durable goods orders tomorrow, ahead of a first-qtr domestic product reading on Thurs & the personal consumption expenditures price index on Fri.  The forecast expects the economy grew at a 2.4% annualized pace in the first qtr, while consensus street estimate forecast for the PCE inflation rate was 2.6% in Mar.  Expectations for when interest rates will be cut by the Fed have moved backward in recent weeks & questions have emerged about whether there could be fewer cuts than anticipated this year.

Treasury yields rise as investors weigh economic outlook

TSLA's announcement about new cars next year brought excitement.  But that didn't affect the rest of the stock market.  More earnings are coming & next week the FOMC meets although little joy is expected as high interest rates are expected to last for some time. 

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