Markets falter and gold sells off

Dow edged up 15, decliners over advancers about 5-4 & NAZ was off 32.  The MLP index stayed in the 281s & the REIT index barley budged in the 375s.  Junk bond funds fluctuated & Treasuries hardly budged keeping yields flattish.  Oil fell chump change to go under 81 & gold sank 33 to 2335 (more on both below).

Dow Jones Industrials 

More built-for-rent single-family homes are being constructed in the US, according to the National Association of Home Builders (NAHB), & experts say this is in part due to the housing affordability crisis.  “When mortgage rates move higher, and it’s harder to buy a home, renting becomes more of an option,” said Robert Dietz, chief economist at the NAHB.  Construction began on about 18K single-family, built-for-rent homes in the first qtr of 2024, a 20% jump compared with the first qtr of 2023, according to NAHB, which analyzed data from the Census Bureau's Quarterly Starts & Completions by Purpose & Design.  “People need somewhere to live, and they have a choice to make,” said Molly Boesel, principal economist at CoreLogic, a real estate data firm.  “And if they can’t find what they need in the for-sale market, they’re going to go to the rental market,” she added.  As a share of all housing starts, single-family built-for-rent starts grew to 10% in 2023 from 5% in 2021, almost doubling in 2 years, according to the National Association of Realtors (NAR), which analyzed data from the Survey of Construction Data by the Census Bureau.  Single-family built-for-rent starts grew to 90K units in 2023, up from 81K units in 2022, the National Association of Realtors reported.  “We are seeing this growing move towards having built-for-rent properties in the U.S.,” said Jessica Lautz, deputy chief economist at the NAR.  The growing share of built-for-rent single-family homes is a response to demand from “people who can’t afford today’s very expensive, out-of-reach housing market,” Lautz said.  Homebuyer affordability declined in Apr, according to the Mortgage Bankers Association's Purchase Applications Payment Index.  NAHB's Dietz said builders are noticing “an expansion” among renters in their 30s & 40s.  Young adults are interested in built for rent “as a growing share who can’t afford to purchase a home today,” Lautz added.

More single-family built-for-rent homes are under construction in the U.S.

Apple (AAPL), a Dow stock, said it won't release several upcoming features unveiled this month, including its flagship “Apple Intelligence” AI product, in the EU this year due to “regulatory uncertainties” stemming from the bloc's Digital Markets Act (DMA) anti-trust regulation.  AAPL said that 3 features — Apple Intelligence, iPhone Mirroring & enhancements to its SharePlay screen-sharing product — won't be available to EU customers due to its belief that “that the interoperability requirements of the DMA could force us to compromise the integrity of our products in ways that risk user privacy and data security.”  The EU passed the DMA in 2023, spurred by concerns that a handful of major technology companies were acting as “gatekeepers” in preventing smaller firms from competing.  Among other things, DMA requires that basic functionalities work across competing devices & ecosystems.  The interoperability requirements apply to iPhones & iPads products.  But Macs are impacted by the DMA because iPhone Mirroring allows users to replicate their iPhone onto the screen of their Mac.  The loss of the company's AI product could be a disappointment to consumers.  Apple Intelligence can proofread your writing or even rewrite it in a friendly or professional tone.  It can create custom emoji called “Genmoji,” search through your iPhone for specific messages from someone, summarize & transcribe phone calls or show you priority notifications.  The company also announced a partnership with OpenAI & a roadmap to other models being added to the platform.  The company says it will work with the EU “in an attempt to find a solution that would enable us to deliver these features to our EU customers without compromising their safety.”  The stock fell 2.19.

Apple Intelligence won’t launch in EU this year due to antitrust regulation

The stock market's climb to record highs has come with conspicuously little volatility.  The S&P 500 has gone 377 days without a 2.05% sell-off.  That's the longest stretch for the benchmark since the great financial crisis.  The index hasn't experienced a gain of at least 2.15% in that time either.  This market lull comes as investors pile into megacap tech stocks amid bets that artificial intelligence will boost profits.  YTD, the S&P 500 is up more than 14%.  Expectations of Federal Reserve rate cuts have also buoyed the broad market index in 2024 as new data shows inflation moving closer to the central bank's 2% goal.  Many investors consider the CBOE Volatility Index (VIX) the de facto fear gauge on the Street.  Last month, it hit its lowest level going back to Nov 2020.  Today, it traded around 13, near historically low levels.  It’s unclear how long this low-volatility period will last.  In 2017, the S&P 500 recorded just 8 daily moves of more than 1%, while the VIX fell to historic lows below 9.  The following year, however, volatility came back into the market & the VIX surged above 50 before easing.

Stocks are in longest stretch without a 2% sell-off since the financial crisis

Gold prices dropped more than 1%, weighed down by a stronger $ higher bond yields after data showed strong US business activity.  Spot gold was down 1.7% at $2319 per ounce & US gold futures settled 1.6% lower to $2331.  US business activity crept up to a 26-month high in Jun amid a rebound in employment.  Data yesterday showed first-time applications for US unemployment benefits fell moderately last week.  The $ rose 0.2% to its highest level in more than 7 weeks, making gold more expensive for other currency holder, while yield on 10-year Treasury notes edged higher after US data.

Gold Slides as US Dollar, Yields Rise

West Texas Intermediate (WTI) crude oil closed lower despite a report showed US inventories fell last week on improving summer demand & tight supply.  WTI crude oil for Jul closed down 56¢ to $80.73 per barrel, while Aug Brent crude, the global benchmark, was last seen down 65¢ to $85.06.  Still, since dropping to the lowest since early Feb on Jun 4, prices have since climbed 10% on improving summer demand & a drop in US oil inventories reported yesterday by the Energy Information Administration.  Crude oil reached a 7-week high after a US report showed declines in crude & fuel stocks, as the expected summer deficits amid strong demand is starting to show.  US implied demand for gasoline reached last year's level while jetfuel demand has reached a 5-year high.  However there are expectations that prices may not have much further to climb over the summer, even as supply remains light amid 2.2M barrels per day of voluntary OPEC+ production cuts continuing thru the 3rd qtr.

WTI Crude Oil Closes With a Loss Despite Lower U.S. Inventories

Today was an unexciting time for the stock market.  Dow stayed near breakeven for the entire session & NAZ has slid lower for 3 days after following an impressive rally this year.  The stock market continues to be heavily overbought while interest rates continue at elevated levels.  And high interest rates could be a drag on for many  months.  This week Dow finished up 560.