Markets wobble witih tech stocks rebounding today

Dow retreated 300 (near session lows), decliners over advancers about 2-1 & NAZ rose 220.  The MLP index added 1 to the 287s & the REIT index remained weak, down 5+ to the 373s.  Junk bond funds slid lower & Treasuries were a tad higher & yields were flattish.  Oil fell about 1 to go below 81 & gold was off 12 to 2331 (more on both below).

Dow Jones Industrials 

US auto sales thru the first ½ of the year are expected to be up by 2.9% compared to a year ago, but there are concerns that the auto industry may not be able to continue the momentum during the last 6 months of the year.  Vehicle inventory levels are growing, incentives are increasing & there's growing uncertainty during the 2nd ½ of the year surrounding the economy, interest rates & presidential election, according to Cox Automotive.  The auto data & research firm expects sales growth to slow during the 2nd ½ of the year to end 2024 at 15.7M units, roughly a 1.3% increase compared to 2023.  And, unlike in recent years, growth is coming from commercial sales compared to more profitable sales to consumers.  “Overall, we’re expecting some weakness in the coming few months,” said Cox chief economist Jonathan Smoke.  “We basically are making some assumptions that we can’t quite hold the pace that we’ve been seeing. But we’re not expecting a collapse either.”  Such circumstances are largely good for consumers, some of whom have been waiting years to purchase a new vehicle amid unprecedented supplies of new vehicles & record high pricing during the coronavirus pandemic.  They're a headwind for automakers, many of which posted record profits due to the high demand & low availability of new vehicles during the global health crisis.  Analysts have been predicting vehicle pricing & profit challenges for most automakers compared to the record or near-record levels of years past.  “There’s a lot of uncertainty that lies ahead, and it may make recent sales successes hard to build upon,” Charlie Chesbrough, Cox's senior economist, said.  “We are concerned that the second half of the year cannot maintain the growth we’ve seen so far.”  Underperformers included Tesla (TSLA), with sales estimated to be down 14.3%, & Stellantis (STLA), which is forecast to be down by 16.5% through Jun.  Honda beat STLA in US sales during the first ½ of the year, pushing the Chrysler & Jeep parent to #6 in sales, down from its recent #4 rank.  TSLA rose 4.50 & STLA was off 8¢.

U.S. auto sales are expected to slow during the second half of 2024

Home prices set another record in Apr, even as mortgage rates rose and the supply of homes for sale increased.  Usually, under those circumstances, prices would weaken, but today's housing market is unlike any other in recent history.  Prices in Apr rose 6.3% compared with the year-earlier month, according to the S&P CoreLogic Case-Shiller National Home Price Index.  It marks the 2nd straight month that the national index jumped at least 1% over its previous all-time high.  Although this is a 3-month moving average, it's important to note that those price gains come even as the average rate on the 30-year fixed mortgage jumped sharply in April, from 6.9% to 7.5%, according to Mortgage News Daily.  “2024 is closely tracking the strong start observed last year, where March and April posted the largest rise seen prior to a slowdown in the summer and fall,” said Brian Luke, head of commodities, real & digital assets at S&P Dow Jones Indices.  “Heading into summer, the market is at an all-time high, once again testing its resilience against the historically more active time of the year.”  The only potential sign of relief is that the annual & monthly gains on the price index are slowing a little bit. Mar's annual gain was 6.5%.  Still, it feeds into what is now one of the least affordable housing markets in US history for both homeownership & renting.  The housing cost burden has hit a record, according to a new report from Harvard’s Joint Center for Housing Studies (HJCH).  Home prices are now 47% higher than they were in early 2020, with the median sale price now 5 times the median household income, according to the study.  For homeowners, 20M are considered cost burdened by their monthly payments.  All of those cost-burdened levels represent records.  Homeowners are also facing a sharp increase in insurance premiums, up an average 21% between 2022 & 2023, according to the HJCH report, & property taxes are also rising.

Here’s how bad housing affordability is now

The cost of living has risen to the point that most Americans are feeling the pressure. An astounding 80% of Americans have experienced a cost of living creep in the last few years, a Credit Karma study found.  This cost of living creep means that consumers are spending more money to afford the same amount of goods or services as they did in the past.  About 66% of those surveyed said the rising cost of living is holding them back from meeting their financial goals.  A lack of rising incomes & high interest rates are 2 of the biggest factors contributing to this cost of living creep.  Almost 60% of people believe their incomes won't ever catch up with the current cost of living.  Even those who have seen their incomes rise can't keep up with increased costs.  Paying down debt, saving for retirement & buying a new car are all being put on hold due to an inability for many Americans to keep up with their everyday expenses.  More than ½ of those surveyed have taken on extra debt or are unable to save now that they're dealing with costly bills & expenses.  Saving in general has taken a back burner, with 37% of respondents unable to set aside any of their income for savings goals.  Instead, their incomes go toward basic living costs, which are still difficult for many Americans to meet.

80% of Americans are dealing with a cost of living creep

Gold prices slipped, hurt by an uptick in the $ & Treasury yields as investors awaited US inflation data due later this week that could provide cues on the timing of interest rate cuts by the Federal Reserve this year.  Spot gold was down 0.6% at $2318 per ounce & US gold futures settled 0.6% lower to $2330.  The $ rose 0.2% against its rivals, making gold more expensive for other currency holders, while benchmark 10-year yields also edged higher.  There's still a lot of physical demand from central banks & there's Asian demand on the expectation that the Fed will cut rates, so investors are reluctant to go short on gold.  Global physically backed gold exchange-traded funds (ETFs), a crucial category of demand, saw inflows last week of $212M (2.1 metric tons) according to the World Gold Council.

Gold Slips as Dollar, Yields Gain; Traders Await More US Data

West Texas Intermediate (WTI) crude oil closed lower, pausing gains that have seen the commodity rise 11% over the past 3 weeks on expected strong summer demand & geopolitical risks.  WTI crude for Aug closed down 80¢ to $80.83 per barrel, while Aug Brent crude, the global benchmark, was last seen down 74¢ to $85.07.  The drop comes as the market pauses its bullish run, even as geopolitical risk is on the rise as Ukraine increases attacks on Russian oil infrastructure & Israel continues to press its war on Hamas in Gaza.  As well, the EU is tightening sanctions on Russia & Houthi rebels are continuing missile attacks on Red Sea shipping.  At a time when there is an expectation of higher-to-be numbers in oil prices, such a sweeping under the carpet of the wider considerations of the conflict is starting to run out of space.  Coupled with some ugly developments in Ukraine/Russia, those that are arguing for another charge in oil prices can probably rely on geopolitical issues.  Traders are also awaiting US inventory data, with the American Petroleum Institute today, followed with official data from the Energy Information Administration tomorrow.

WTI Closes Lower Despite Expectations for High Summer Demand and Rising Geopolitical Risk

Dow looks to be finding its feet amid the shift from techs to value stocks, giving weight to the idea of a broadening in gains to other sectors.  As the qtr closes on Fri, some traders & investors are evening out positions in various stocks.  Everybody is concerned with high levels of interest rates which are expected to last for some time.