Dow jumped 239, advancers over decliners 5-2 & NAZ soared 213 (near 11K) after its recent pullback. The MLP index added 2 to 136 & the REIT index went up 2 to the 359s. Junk bond funds rose in price & Treasuries drifted lower. Oil shot up 1 to the 42s & gold recovered 11 to 1957.
AMJ (Alerian MLP Index tracking fund)
| CL=F | Crude Oil | 42.55 | +0.94 | +2.3% |
| GC=F | Gold | 1,950.50 | +4.20 | +0.2% |
US consumer prices jumped 0.6% in Jul as gasoline prices continued to rise. The Labor Dept reported that the increase last month in its consumer price index matched a 0.6% rise in Jun. The uptick was about twice what was expected. But inflation remains in check as consumer prices are up just 1% over the past year. Gasoline prices rose 5.3% from Jun to Jul but are down 20.3% in the past 12 months as the coronavirus recession kept many Americans from driving. Food prices dipped 0.4%, the first drop since Apr 2019. Grocery prices dropped 1.1% while the cost of dining out rose 0.5%. Excluding volatile food & energy prices, prices surged 0.6% last month from Jun, the biggest monthly increase since 1991. Still, core inflation is only up 1.6% from a year earlier. Consumer spending rebounded strongly in Jun as states began to ease lockdowns — though a recent surge in coronavirus cases has forced some business to delay or cancel plans to reopen. Deflation, falling prices, can hurt the economy by nudging consumers to delay spending because they believe prices will be lower in the future.
US consumer prices rise in July, blowing past expectations
The US economic recovery from the coronavirus pandemic may be stalling after a surge in infections across the country forced most states to pause or reverse their reopenings, according to Boston Federal Reserve Pres Eric Rosengren. “Despite the sizeable interventions by monetary and fiscal policymakers, high-frequency economic data indicate that the recovery may be losing steam, as activities in many states are once again restricted, officially or voluntarily, to slow the virus’s spread," Rosengren said. Rosengren raised fresh doubts about the viability of a full economic rebound & added the virus will continue to dictate the speed of the nation's turnaround -- a sentiment that has been echoed by Jerome Powell, the chair of the central bank. "Unfortunately, as long as the virus poses significant threats to public health, a full economic recovery will be very difficult as individuals, often voluntarily, avoid activities that place their health at risk," Rosengren said. The US job market recovery appears to be plateauing, with the Labor Dept's Jul jobs report showing a gain of 1.8M new positions, well below the record-shattering 4.8M created in Jun. Over the past 3 months, the economy has added back less than ½ (42%) of the 22M jobs it lost during the pandemic. There are still 10.6M more out-of-work Americans than in Feb. As the pandemic limits the ability of the economy to recover quickly, it's possible that a growing number of job losses could become permanent, according to Rosengren. "An increasing number of those who are currently temporarily unemployed may ultimately have to face permanent layoffs and the difficult task of finding a new job in a changed economic environment," he added.
Top Fed official warns US economic recovery may be losing steam
2 straight weeks of record low mortgage rates brought consumers back to their lenders, but rates may now be reversing course. Mortgage application volume rose a significant 6.8% last week compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. This after they pulled back slightly the week before. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510K or less) decreased to 3.06% from 3.14%, with points dropping to 0.33 from 0.39 (including the origination fee) for loans with a 20% down payment. “Mortgage rates fell across the board last week, as investors grew less optimistic of the economic rebound given the resurgence of virus cases. Loan types such as the 30-year fixed, 15-year fixed, and jumbo all reached survey lows,” said Joel Kan, an MBA economist. Mortgage applications to refinance a home loan, which are most rate sensitive, jumped 9% for the week & were 47% higher than the same week one year ago. The annual comparison, while still strong, has been shrinking dramatically over the last several weeks. The refinance share of mortgage activity increased to 65.7% of total applications from 63.9% the previous week, the highest share since Apr. Mortgage applications to purchase a home rose 2% for the week and were a strong 22% higher than the same week one year ago. “While this was still positive news for the purchase market, the gradual slowdown in the improvement in the job market and tight housing inventory remain a concern for the coming months, even as low mortgage rates continue to provide support,” added Kan. That support from low rates may also be waning. Mortgage rates rose sharply yesterday amid a sell-off in the bond market. Mortgage rates loosely follow the yield on the 10-year Treasury.
Another record low mortgage rate juiced weekly demand, but rates are suddenly rising now
After running into profit taking yesterday, investors returned to buy stocks. The news on the vaccine front is encouraging & economic data is generally seen as positive. The popular averages are all close to record highs.
Dow Jones Industrials
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