Markets fall as Treasury yields keep rising

Dow dropped 369, decliners over advancers about 3-1 & NAZ sank 185.  The MLP index was steady in the 283s & the REIT index bounced back 2+ to the 342s.  Junk bond funds slid lower & Treasuries were sold, raising yields (more below).  Oil was off 1+ to go under 71 following its recent rise & gold tumbled 28 to 2731.

Dow Jones Industrials

Coca-Cola (KO), a Dow stock & Dividend Aristocrat, reported quarterly earnings & revenue that topped expectations, thanks to a boost from higher prices that offset sluggish demand.  3rd-qtr EPS was 66¢, down from 71¢ a year earlier.  Excluding items, the company EPS was 77¢.  Adjusted net sales of $11.9B were roughly flat from a year earlier.  Organic revenue, which strips out the impact of acquisitions, divestitures & currency, climbed 9% during the qtr.  Unit case volume fell 1% in the qtr, driven by weakening demand in some intl markets.  The metric strips out the impact of pricing & foreign currency to reflect demand.  Consumer companies, including KO, have reported in recent months that customers are more price sensitive, leading to sluggish demand for its products as prices remain high.  Globally, volume for its sparkling soft drinks, like Sprite, & for its namesake soda were both flat for the qtr.  Its juice, dairy & plant-based beverages division reported a 3% decline in volume.  Its water, sports, coffee & tea segment saw volume fall 4%, fueled by a 6% drop in bottled water.  Pricing rose 10%.  Roughly 4% of that increase comes from markets experiencing intense inflation, like Argentina, while the rest is the result of price hikes & customers trading up to pricier options.  For 2024, KO expects organic revenue growth of roughly 10%, on the high end of its prior range of 9-10%.  The company reiterated its projection that comparable EPS will rise 5-6%.  The stock fell 1.77.

Coca-Cola tops earnings estimates, as higher prices offset sluggish demand

Sales of previously owned homes fell 1% in Sep compared with Aug, to a seasonally adjusted, annualized rate of 3.84M units, the slowest pace since 2010, according to the National Association of Realtors (NAR).  Sales were 3.5% lower than in Sep 2023 & sales fell in 3 out of 4 US regions, with just the West region seeing a gain.  This count is based on closings, representing contracts signed likely in Jul & Aug.  Mortgage rates started Jul near 7% on the 30-year fixed & then fell slowly thru Aug to just below 6.5%.  Rates are now more than a full percentage point lower than they were a year ago.  “Home sales have been essentially stuck at around a four-million-unit pace for the past 12 months, but factors usually associated with higher home sales are developing,” said Lawrence Yun, chief economist for the NAR.  Inventory rose 1.5% month to month to 1.39M homes for sale at the end of Sep.  That represents a 4.3-month supply at the current sales pace.  Inventory was 23% higher from Sep 2023.  “More inventory is certainly good news for home buyers as it gives consumers more properties to view before making a decision,” Yun added.  “However, the inventory of distressed properties is minimal because the mortgage delinquency rate remains very low. Distressed property sales accounted for only 2% of all transactions in September.”  The pressure of still low inventory continues to push prices higher.  The median price of an existing home sold in Sep was $404K, an increase of 3% year over year and the 15th consecutive month of annual price gains.  Homes are sitting longer, an average of 28 days compared with just 21 days a year ago.  First-time buyers pulled back again, making up just 26% of Sep sales.  That matches the all-time low from Aug.

September home sales drop to lowest level since 2010

The US 10-year Treasury yield rose again as traders digested the latest comments from Federal Reserve officials on the trajectory of interest rate cuts.  The yield on the 10-year Treasury rose more than 2 basis point to 4.2%, not seen since late Jul.  At its session high, the benchmark rate traded at 4.24%.  That move comes after the 10-year soared 12 basis points on Mon & broke above 4.2% yesterday.  Meanwhile, the yield on the 2-year Treasury stood at 4.05%, up more than 1 basis point.  It hit a high of 4.065% earlier in the day, a level not seen since Oct 10.  Yields & prices move in opposite directions & 1 basis point equals 0.01%.  Higher Treasury yields are putting pressure on equities, with stock futures falling, the declines coming after the S&P 500 posted its first back-to-back loss since early Sep.  Robust economic data & deficit worries are among the factors behind the rise in the 10-year Treasury yield, despite a ½-point rate cut from the Fed in Sep.  Traders have become concerned that the central bank may be less inclined to reduce rates, even as the Fed had forecast another ½-point worth of cuts before the year ends.

10-year Treasury yield climbs to highest level since late July

Doubts about rate cuts weighed on investors.  The rally in stocks has stalled as investors debate how quickly the Federal Reserve will cut interest rates over the next year.  Gloom about the prospect of rates staying higher for longer has dragged on bond prices in recent days, sending the 10-year Treasury yield to levels not seen since Jul.  The yield rose slightly today, firmly above the 4.20% level.