Dow sank 419, decliners over advancers 3-1 & NAZ dropped 399. The MLP index hovered in the 292s & the REIT index was off 2 to the 399s. Junk bond funds were little changed & Treasuries had a little selling, allowing yields to inch higher (more below). Oil crawled up to go over 70 as Israeli strikes against Yemen’s Houthis triggers fears & gold fell 20 to 2633.
Dow Jones Industrials
Heading into the holidays, many Americans were already saddled with record-breaking credit card debt. And yet, consumer spending is set to reach a fresh high this season. The National Retail Federation (NRF) reported last week that spending in Nov 1 - Dec 31 is “clearly on track” to reach a record, $979 - $989B. “Job and wage gains, modest inflation and a heathy balance sheet have led to solid holiday spending,” the NRF's chief economist, Jack Kleinhenz, said. But other reports show that many shoppers are increasingly leaning on credit cards to manage their holiday purchases. To that point, 36% of consumers have taken on debt this season, a recent report by LendingTree found. And those who dipped into the red racked up an average of $1181, up from $1028 in 2023, according to the survey of more than 2000 adults. “No one should be surprised that so many Americans took on debt this holiday season. Prices are still really high and that means that lots of Americans simply didn’t have any choice,” said Matt Schulz, LendingTree's chief credit analyst. “Inflation is still a big deal in this country, and it’s having a huge impact on people’s finances, including their holiday spending,” he said. Heading into the peak holiday shopping season, credit card balances were already 8.1% higher than a year ago, according to the Federal Reserve Bank of New York's report on household debt. Further, 28% of credit card users had not paid off the gifts they bought last year, according to another holiday spending report by NerdWallet, which polled more than 1700 adults in Sep. Of those with debt, 21% expect it'll take 5 months or longer to pay it off, LendingTree also found. At that rate, sky-high interest charges will exact a heavy toll. “That means less money to put towards other big goals for the new year, such as growing an emergency fund or saving for college,” he said. “In more extreme cases, it may mean you’re less able to pay essential bills or keep food on the table. In either case, it’s a big deal.”
Credit card debt set to hit record levels as consumer holiday spending rises
Mortgage rates spiked this week to the highest level in 5 months, ending the year slightly higher than where they started. Freddie Mac's latest Primary Mortgage Market Survey, showed that the average rate on the benchmark 30-year fixed mortgage jumped to 6.85%, up from last week's reading of 6.72%. The average rate on a 30-year loan was 6.61% a year ago. This week's increase marked the highest level on the 30-year loan since mid-Jul, when the rate was 6.89%, according to Freddie Mac data. The lowest rate this year was 6.08% at the end of Sep, while the highest — 7.22% — was reached at the beginning of May. "Mortgage rates increased for the second straight week, rebounding after a decline from earlier this month," said Sam Khater, Freddie Mac's chief economist. "While a slight improvement in new and existing home sales is encouraging, the market remains plagued by an overwhelming undersupply of homes. A strong economy can help build momentum heading into the new year and potentially boost purchase activity." The average rate on the 15-year fixed mortgage climbed to 5.92% from 5.84% last week. 1 year ago, the rate on the 15-year fixed note averaged 5.95%.
Mortgage rates rise for second straight week, highest since July
The 10-year Treasury yield rose again today, hovering near a 7-month high. The yield on the benchmark 10-year Treasury was just 1 basis point higher at 4.593%. The 10-year rate hit a high of 4.641% in the previous session, hitting its highest level since May. The 2-year Treasury was fractionally lower at 4.318%. 1 basis point is equal to 0.01% & yields move inversely to prices. After the Christmas break, jobless claims data for last week came in 1000 lower at 219K, below the 225K forecast. However, continuing claims rose by 46K for the latest week to the highest level since Nov 2021. The 10-year Treasury yield has risen more than 40 basis points in Dec as traders anticipate a more hawkish Federal Reserve in 2025. The central bank next meets at the end of Jan, when a rate hold is expected.
10-year Treasury yield rises slightly, hovering near a seven-month high.
Stocks opened on a downbeat note as the stock market plods to the finish of a largely triumphant year. After stacking impressive gains this year, some of the biggest names in tech are losing ground as investors take profits, rebalance their portfolios or reassess their lofty valuations.
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