Markets slide with fresh tariffs and Fed minutes in focus

Dow lost 135, decliners over advancers 2-1 & NAZ slid 33.  The MLP index stayed near to 328 & the REIT index was off 1+ to the 407s.  Junk bond funds remained mixed & Treasuries were flattish, keeping yields little changed.  Oil crawled higher, going into the 72s, & gold was off  7 to 2941.

Dow Jones Industrials

Pres Trump said he may broaden the scope of US tariffs on imports to include automobiles, pharmaceuticals & semiconductors.  Yesterday, Trump said the duties would be around 25% & “go very substantially higher over a course of a year.”  The pres did not indicate whether the new tariffs would apply to all vehicles coming into the US or be targeted toward certain countries but said they could start as early as Apr 2.  However, the threat represents a broadening in the administration's aggressive trade policy that already has included 25% tariffs on steel & aluminum imports set to take effect in Mar.  The nations with the biggest auto exports to the US are Mexico, Japan & Canada.  Trump said the tariffs already are having the desired effect, with companies domiciled overseas wanting to come back to the US.  “I’ve been contacted by some of the biggest companies in the world, and because of what we’re doing economically and through tariffs and incentives, they want to come back into the United States,” he said.  “When they come back into the United States and they have their plant or factory here, there is no tariff,” Trump added.  “So we want to give them a little bit of a chance.”

Trump suggests 25% tariffs on autos, pharma and semiconductors that could go even higher

Mortgage rates dipped slightly last week, but so did mortgage demand, as housing affordability continues to sideline potential buyers.  Total mortgage application volume fell 6.6% for the week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index.  The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766K or less) dropped to 6.93% from 6.95%, with points increasing to 0.66 from 0.64 (including the origination fee) for loans with a 20% down payment.  “Mortgage rates decreased on average over the week, as markets brushed off unexpectedly strong inflation data. Despite mortgage rates declining, mortgage applications decreased to their slowest pace since the beginning of the year,” said Joel Kan, an MBA economist.  Applications to refinance a home loan, which had been on the rise, dropped 7% for the week but were 39% higher than the same week 1 year ago.  Percentage changes week to week have been large simply because the overall volume of refinancing is so low.  The vast majority of borrowers today have mortgages with rates significantly lower than what is now being offered.  Applications for a mortgage to buy a home fell 6% for the week but were 7% higher year over year.  Housing affordability continues to weigh on potential buyers, & economic uncertainty, especially regarding the effect of potential tariffs, are only adding to the pressure.  “Purchase applications were down for the week, as buyers remained on the fence, although loosening inventory may help support activity in the coming months,” Kan added.  Mortgage rates moved slightly higher to start this week, but holiday-shortened weeks tend to see more volatility in the bond market.

Weekly mortgage demand drops 6%, as homebuyers remain ‘on the fence’

Americans' household debt levels, including credit card debt, rose to new all-time highs in the 4th qtr of 2024, according to a report by the Federal Reserve Bank of New York.  The report showed that overall household debt increased by $93B to $18T at the end of 2024, an all-time high.  Credit card balances rose by $45B from the prior qtr to reach $1.2T at the end of Dec, which is also a record high.  Delinquency rates ticked higher by 0.1 percentage points from the prior qtr to 3.6% of outstanding debt in some stage of delinquency, with delinquency transition rates steady for nearly all types of debt except for credit cards – which had a small uptick in transitions from current to delinquent.  Serious delinquency, defined as 90 or more days past due, moved higher for auto loans, credit cards & HELOC balances but was stable for mortgages.  The New York Fed noted that while the report shows Americans are generally faring well in terms of managing their household debt, there are signs that rising prices & elevated interest rates are causing issues for some auto loan borrowers.  "Overall, consumers are in pretty good shape in terms of the household debt and escape, largely driven by stable balances and solid performance in mortgage loans," the New York Fed's economic researchers wrote.  "However, for auto loans, higher car prices combined with higher interest rates have driven monthly payments upward and have put pressure on consumers across the income and credit score spectrum," they wrote.  "The episode of rapidly rising car prices has had heterogeneous impacts on borrowers, who have shifted between used and new cars as well as between loans and leases."  The number of consumers who had a bankruptcy notation added to their credit record was 123K in the 4th qtr according to bank data, a decline from the 3rd qtr.  Consumers with a 3rd-party collection noted on their credit record was "relatively stable" in the 4th qtr, the New York Fed said.

Weekly mortgage demand drops 6%, as homebuyers remain ‘on the fence’

Stocks were lower as investors weighed Pres Trump's latest 25% tariff salvo & waited for Federal Reserve minutes for insight into future policy.  Markets are caught in wait-&-see mode as they wait for the true impacts of Pres Trump's threatened tariffs to show themselves.   However stocks have managed to stay broadly upbeat.