Dow climbed 161, but decliners over advances 4-3 & NAZ added only 13. The MLP index was off 1+ to the 286s & the REIT index retreated 3+ to the 434s. Junk bond funds eased a little higher & Treasuries continued to see selling which raised yields, taking the 10 year note back to about 4.1%. Oil remained slightly higher above 70 & gold gained 14 to 2705 (more on both below).
Dow Jones Industrials
The head of the International Monetary Fund cautioned that high debt & low growth remained major impediments to the global economy. IMF Managing Director Kristalina Georgieva said that while notable progress had been made in the global economic recovery, govs had become too accustomed to borrowing, with “anemic growth” adding to the challenges of servicing that debt. “It’s not yet time to celebrate,” she continued. “When we look into the challenges ahead of us, the biggest one is low growth, high debt. This is where we can and must do better,” she added. While Georgieva commended the work of major central banks in taming inflation, she noted that the achievements had not been universal & that some economies were continuing to struggle with higher prices, which was adding to social & political discontent. “It is successful major economies that have done really well … and there are pockets in the world where inflation is still a problem,” she said. “The impact of higher prices remains, and it is making many people in many countries feel worse off and angry.” The comments come as finance ministers & central bank governors are set to meet next week in DC for the 2024 annual meetings of the IMF & the World Bank Group. They will discuss topics including the world economic outlook, poverty eradication & the green energy transition. Georgieva warned that intl trade would no longer be the “engine of growth” it once was, highlighting the proliferation of restrictive policies among many economies. The US & the EU have moved to impose a series of punitive tariffs against China over what they deem as Beijing’s unfair trade practices.
IMF chief says ‘not yet time to celebrate’ as low growth and high debt pose risks
Mortgage rates continued their upward climb this week, further hindering demand in the housing market amid elevated rates & high home prices. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage surged to 6.44% from last week's reading of 6.32%. The average rate on a 30-year loan was 7.63% a year ago. "The 30-year fixed-rate mortgage increased for the third consecutive week, moving closer to 6.5%," said Sam Khater, Freddie Mac's chief economist. "In general, higher rates reflect the strength in the economy that is supportive of the housing market," Khater said. "But notably, as compared to a year ago, rates are more than one percentage point lower and potential homebuyers can stand to benefit, especially by shopping around for the best quote as rates can vary widely between mortgage lenders." Many would-be buyers & sellers are holding out to see if rates fall further. Currently, about 80% of mortgage holders have a rate below 5%, according to a Zillow survey. The average rate on the 15-year fixed mortgage also rose to 5.63% from 5.41% last week. 1 year ago, the rate on the 15-year fixed note averaged 6.92%.
Mortgage rates march higher for third straight week
Israeli Foreign Minister Israel Katz said that Hamas leader Yahya Sinwar was killed by Israel's military forces. “The elimination of Sinwar creates an opportunity for the immediate release of the hostages and a potential change that could lead to a new reality in Gaza—without Hamas and without Iranian control,” he said. Earlier in the day, the Israeli Defense Forces (IDF) said it was investigating the “possibility” that Sinwar was among 3 militants killed in an operation in the Gaza Strip, whose identities it could not confirm at the time. “The forces that are operating in the area are continuing to operate with the required caution,” it added in a social media post. In a social media update posted after the IDF communication, Israeli Defense Minister Yoav Gallant quoted a biblical citation, “You will pursue your enemies and they will fall before you by the sword. - Leviticus 26.” He added, “Our enemies cannot hide. We will pursue and eliminate them.” National Security spokesman John Kirby said they were aware of reports Sinwar may be dead, but that the US officials had not independently verified them. As the news broke, Pres Biden was en route to Germany to meet with allied countries for talks on Ukraine & the Middle East. Markets have been mired in the Middle East conflict, which now poses substantial risks to oil supplies, if Israel answers the latest Iranian hostilities with strikes targeting Tehran's energy infrastructure & export facilities. Houthi maritime attacks against ships it claims are linked to Israel, the US or the UK, which have also been carried out against unaffiliated vessels, have meanwhile disrupted a key commercial route in the Red Sea that links Asia-Pacific & the Mediterranean.
Hamas leader Yahya Sinwar has been killed, Israeli foreign minister says
Gold prices hit record highs as uncertainty surrounding the US presidential elections & the war in the Middle East prompted investors to seek out the safe-haven asset, while easing monetary policy environment kept prices elevated. Spot gold rose 0.6% to $2689 per ounce & US gold futures gained 0.5% to $2705. Gold has seen a surge of over 30% this year, surpassing record levels, driven by prospects of further Federal Reserve rate cuts after a ½ percentage point rate cut last month & ongoing geopolitical uncertainties. Gold prices are expected to rise to $2941 a troy ounce over the next 12 months, delegates to the London Bullion Market Association's annual gathering predicted earlier this week. Earlier in the US session, prices had backed off from record highs after data showed US retail sales increased slightly more than expected in Sep while a Labor Dept report said unemployment unexpectedly fell last week. Gold, which yields no interest on its own, tends to gain when interest rates are cut. The ECB also cut interest rates for the 3rd time this year by qtr-point.
Gold Trading at a Record High Even as Yields Jump After U.S. Retail Sales Rose More Than Expected
West Texas Intermediate (WTI) crude oil closed with a small gain rising off a 2-week low as geopolitical worries ease as a report showed an unexpected drop in US inventories last week. WTI crude for Nov closed up 28¢ to settle at $70.67 per barrel, while Dec Brent crude, the global benchmark, was last seen up 24¢ to 74.46. Prices fell to the lowest since Oct 2 yesterday on easing worries an expected retaliatory attack on Iran for its Oct.1 missile strike on Israel would target oil infrastructure after reports said Israel plans to only attack Iranian military assets. In its weekly survey, the Energy Information Administration said US oil inventories fell by 2.2M barrels last week, above the estimate for a rise of 1.8M barrels. Weak demand from China & the Dec start to OPEC+'s plan to restore 2.2M bpd of production cuts with monthly supply additions of 180K-barrels per day for a year are also keeping a check on prices. Crude oil remains rangebound as demand worries, especially in China, a country at the forefront of electrification, & the prospect of increased OPEC+ supply offsetting a potential threat to Middle East supplies.
WTI Oil Edges Up from a Two-Week Low Despite Weak China Demand as U.S Inventories Fall
Stocks pared session gains but still ended in positive territory. Even with Nvidia (NVDA) at another record high, investors' enthusiasm was not greatly affected with decliners greater than advancers. The rise in retail sales was not really impressive. If the killing of Sinwar is proven without a doubt, that may help the volatile situation in the MidEast which could be plus for global trade.
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