Markets hesitate after rally shows signs of fatigue

Dow went off 17, advancers & decliners were about even & NAZ added 13.  The MLP index was up 1+ to the 281s & the REIT index slid fractionally lower to the 372s.  Junk bond funds were mixed & Treasuries had limited selling, raising yields slightly (more below).  Oil rose pennies in the 81s & gold fell 22 to 2346.

Dow Jones Industrials 

Sales of previously owned homes are sitting at a 30-year low and didn't move much in May as prices hit a new record & mortgage rates remain high.  Existing home sales in May were essentially flat, down 0.7% from Apr to a seasonally adjusted, annualized rate of 4.1M units, according to the National Association of Realtors (NAR).  Sales fell 2.8% from May of last year.  This count of closed sales is based on contracts likely signed in Mar & Apr.  The sluggish sales pace came as rates took a big leap in Apr.  The average rate on the popular 30-year fixed loan started the month just below 7% & then rose to just over 7.5% by mid-Apr, before settling back slightly in May, according to Mortgage News Daily.  That rate is now right around 7%.  “Home sales refuse to recover,” said Lawrence Yun, chief economist at the NAR.  “I thought we would see a recovery this spring. We are not seeing it.”  Sales were unchanged month to month in all regions except the South, where they fell 1.6%.  The biggest change in May is that the inventory of homes for sale jumped, up 6.7% month to month & 18.5% higher than in May last year.  At the current sales pace, there is now a 3.7-month supply.  While inventory is gaining, it is still very low given demographics & demand.  “Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months. Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions,” Yun added.  That demand continues to push prices higher.  The median price of an existing home sold in May was $419K, a record-high price in the Realtors' recording & up 5.8% year over year.  The gain was the strongest since Oct 2022.  Prices gained in all regions.  The Realtors noted that the mortgage payment for a typical home today is more than double what it was 5 years ago.  Not only have rates climbed, but home prices are more than 50% higher than they were 5 years ago.  That comes in part because the median is skewing to the higher end.

Home prices hit record high in May as sales stall

McDonald's (MCD), a Dow stock & Dividend Aristocrat,  outlined what its upcoming $5 meal deal will contain.  Under the meal deal, customers will get their pick of 1 of 2 sandwich options — a McDouble or a McChicken — plus small fries, 4-piece McNuggets & a small soda as accompaniments.  It will debut on participating restaurants' menus in the US on Tues & be available for a "limited time" only.  The company has also been running a "Free Fries Friday" deal nationwide.  It started that promotion, which gives customers who buy a menu item that costs at least $1 thruh the chain's app a complimentary medium package of fries, last fall.  "We’re focused on living up to that legacy and offering delicious, affordable options customers can enjoy any time they walk through our doors, go through our Drive Thru or place an order through our app," MCD's USA Pres Joe Erlinger said.  In late Apr, MCD's CEO Chris Kempczinski noted that quick-service restaurant consumers continued to feel pressure.  "It is clear that broad-based consumer pressures persist around the world," he said at the time.  "Consumers continue to be even more discriminating with every dollar that they spend as they faced elevated prices in their day to day spending, which is putting pressure on the QSR industry."  He also said MCD's "must be laser-focused on affordability" for customers.  The stock rose 4.34.

McDonald’s launches $5 meal deal with popular picks for a limited time

Treasury bond yields inched higher as investors pondered the latest economic data for signs of a slowing economy.  The 10-year Treasury yield was 2 basis points higher at 4.275% & the 2-year Treasury note yield was a basis point higher at 4.743%.  Yields & prices move in opposite directions & 1 basis point is equivalent to 0.01%.  Initial jobless claims data showed an increase from a week ago, while housing starts fell more than expected last month.  The number of Americans filing new claims for unemployment benefits dropped by 5K to 238K last week. The forecast called for 235K claims for that period.  Housing starts, a key metric for real estate investors, were down 5.5% to a seasonally adjusted annual rate of 1.27M units in May, according to a report from the Commerce Dept’s Census Bureau.  Investors also considered a worse-than-expected reading of the Philadelphia Fed Manufacturing Index, contributing to recent signs of a slowing economy.

Treasury inch higher as data hints at slowing economy

Stocks are struggling, looking for direction.  Dow is back to where it was in early Apr.  Thoughts of high interest rates lasting longer than previously expected are keeping investors from buying stocks.