Markets were under pressure on uncertainty about interest rate cuts

Dow gained 211, advancers over decliners 2-1 & NAZ dropped 319.  The MLP index jumped 3+ to 281 & the REIT index crawled up 1+ to the 353s.  Junk bond funds had modest demand & Treasuries saw buying which reduced yields.  Oil was fractionally higher to the 83s & gold went up 4 to 2402 (more on both below).

AMJ (Alerian MLP Index tracking fund)

The cost of buying a new house just hit a fresh record as mortgage rates rose to the highest level this year, according to a new report.  Findings from Redfin show the combination of steep mortgage rates & elevated home prices has pushed the median monthly housing payment to a record $2775, an 11% increase from the same time last year.  "Market conditions for homebuyers remain challenging with few homes listed and costs for ownership still climbing," said Ben Ayers, Nationwide senior economist.  "Despite strong fundamentals for demand from demographics and a strong labor market, many first-time buyers are being shut out of the market by elevated financing rates and rising prices."  There are a number of driving forces behind the affordability crisis.  Years of underbuilding fueled a shortage of homes in the country, a problem that was later exacerbated by the rapid rise in mortgage rates & expensive construction materials.  Higher mortgage rates over the past 3 years have created a "golden handcuff" effect in the housing market.  Sellers who locked in a record-low mortgage rate of 3% or less during the pandemic began have been reluctant to sell, limiting supply further & leaving few options for eager would-be buyers.  Economists predict that mortgage rates will remain elevated for the first ½ of 2024 & that they will only begin to fall once the Federal Reserve starts cutting rates.  Even then, rates are unlikely to return to the lows seen during the pandemic.  On top of that, investors are growing skeptical about the odds of a Fed rate hike this year given the string of hotter-than-expected inflation reports at the beginning of the year.  "Some house hunters are hoping to buy now because they’re concerned rates could rise more, and others have grown accustomed to elevated rates and pushed down their home-price budget accordingly," the Redfin report added.  Mortgage buyer Freddie Mac said that the average rate on a 30-year loan this week crossed the 7% threshold for the first time this year, jumping from 6.88% to 7.1%.  While that is down from a peak of 7.79% in the fall, it remains sharply higher than the pandemic-era lows of just 3%.  Available home supply remains down a stunning 34.3% from the typical amount before the COVID-19 pandemic began in early 2020, according to a separate report published by Realtor.com.  Most homeowners say they are nearly twice as willing to sell their home if their mortgage rate is 5% or higher, according to a separate Zillow survey.  Currently, about 80% of mortgage holders have a rate below 5%.

The cost of buying a house hit another record high as mortgage rates spike again

Tesla (TSLA) has issued a voluntary recall of 3878 Cybertrucks to fix a “stuck pedal” issue that had been depicted in a viral TikTok video posted last week by owner Jose Martinez.  A pad on top of the Cybertruck's accelerator pedal could come loose & get trapped in the interior trim causing unintended acceleration, a TSLA filing with the National Highway Traffic Safety Administration acknowledged.  TSLA's service department plans to replace or repair the accelerator pedal assembly, free of charge for owners.  In a defect notice, TSLA revealed that an “unapproved change introduced lubricant (soap) to aid in the component assembly of the pad onto the accelerator pedal. Residual lubricant reduced the retention of the pad to the pedal.”  TSLA first became aware of this issue on Mar 31.  After assessing the problem, TSLA on Apr 12 decided to issue a voluntary recall of the Cybertrucks, the filing says.  Deliveries of the Cybertruck have been low, with under 4000 units shipped since CEO Elon Musk kicked off deliveries at an unveiling event on Nov 30, 2023.  The company reported disappointing first-qtr vehicle deliveries for 2024, totaling 387K cars.  That represented a drop of 8.5% from the same quarter last year.  The stock fell 2.88.

Tesla recalls Cybertruck over ‘trapped pedal’ issue seen in owner’s viral TikTok video

Lululemon (LULU) is planning to shut down its Washington distribution center & lay off 128 employees after opening a massive new warehouse outside of Los Angeles, the company confirmed.  The athletic apparel retailer filed a WARN notice with the state’s Employment Security Dept yesterday, notifying it of its plans to close its distribution center in Sumner, located about 35 miles south of Seattle, & cut 128 jobs.  Layoffs will begin on Jun 21 & the facility is expected to close by the end of the year.  “As we continue to deliver on our growth strategy to meet the needs of our guests, we regularly evaluate our distribution network to help shape and support the future vision of our business. Following a review of our current infrastructure and the evolution of our fulfillment strategy, which includes a multi-year investment to increase overall capacity and support our growth, we have made the decision to close one of our smaller distribution centers — located in Sumner, WA,” the spokesperson said.  “While some employees will be retained and will relocate to other facilities, including our recently opened distribution center in the greater Los Angeles area, the optimization will result in the reduction of just over 100 positions within the existing Sumner distribution center,” the person added.  “We are committed to supporting our impacted employees through this transition.”  As of Jan 31, 2021, Lululemon leased & owned 1.12M square feet of distribution centers across Canada & the US.  By the end of this Jan, that footprint grew to nearly 4M square feet.  Recently, its growth in North America, its largest region by sales, has started to stagnate.  In Mar, it reported holiday earnings that beat expectations, but it issued disappointing guidance after seeing slow sales in the US.  In the 3 months that ended Jan 28, sales grew 9% in the Americas, compared to 29% growth in the year-ago period.  The stock rose 4.96.

Lululemon to shutter Washington distribution center, lay off 128 employees

Gold prices rose for a 5th straight week of gains, as investors rushed to the safe-haven asset as escalating tensions between Iran & Israel fueled fears of a wider regional conflict.  Spot gold closed up 7% at $2395 after rising to as high as $2417 earlier in the session & prices were up over 1% this week.  Explosions echoed over an Iranian city on Fri in what was described as an Israeli attack, but Tehran played down the incident & indicated it had no plans for retaliation.  The geopolitical situation with retaliation of Iran & the latest attack in the Iranian state has raised the risk that the conflict will escalate & is helping safe-haven gold.  Meanwhile,  Federal Reserve policymakers have coalesced around the idea that there is no urgency to cut interest rates, given the slow progress on inflation & a resilient US. economy.

Middle East Turmoil Sets Gold on Track to Fifth Straight Weekly Gain

West Texas Intermediate (WTI) crude oil closed higher as the geopolitical risk premium rose after Israel launched a retaliatory attack on Iran, but one that caused little damage.  WTI crude oil for May closed up 41¢ to settle at $83.14 per barrel, the lowest since late Mar, while Jun Brent crude, the global benchmark, was up 33¢ to $87.44.  The rise came after Israel carried out drone attacks near the Iranian city of Isfahan that caused little reported damage.  The attacks were a response to Iran's weekend attempt to strike Israel with drone & missiles that also had little effect, with most of the weapons shot down by aircraft & air-defense systems.  A report said the Iranian gov is downplaying the attack & quoted an Iranian official said the country has no immediate plans to retaliate.  Oil prices spiked higher following the attack, with Brent crude briefly rising back above $90 in overnight trade before quickly retreating, as traders returned to bidding down oil's risk premium even as Israel's continues its war in Gaza while Yemen's Houthi militants are still attacking Red Sea shipping.

WTI Oil Rises As Risk Premium Moves Higher After Israeli Attack on Iran

With Israel's strike on Iran, there was a lot for traders to think about.  Trading was choppy with Dow posting a solid gain while stocks on NAZ were hit with heavy selling.  Don't see that too often.  Today's rally for the Dow brought it up to even for the week.  Earnings should drive the stock market next week.

Dow Jones Industrials