Dow dropped 104, advancers over decliners 3-2 & NAZ went down 14. The MLP index fell 1+ to the 162s & the REIT index was off 1 to the 403s. Junk bond funds fluctuated & Treasuries slipped lower, bringing even higher yields. Oil went under 61 again & gold tumbled plummeted 32 to 1682 (more on both below).
AMJ (Alerian MLP index tracking fund)
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US home prices grew at their fastest pace in seven years in Jan as supply plummeted to a new low. The Case Shiller 20-city index posted an 11.1% year-over-year gain, up from 10.2% in the previous month, the largest jump since 2014, while the 10-city index an annual increase of 10.9%, compared to 9.9% in the previous month. On a monthly basis, the 10 & 20-city indexes increased 0.8% & 0.9% between Dec-Jan, respectively. Seasonally adjusted, those indexes both increased by 1.2%. In Jan, 19 out of 20 cities reported increases before seasonal adjustment, & all 20 cities reported increases after seasonal adjustment. Meanwhile, the S&P CoreLogic Case-Shiller National Home Price index rose 11.2% in Jan, compared to 10.4% the previous month, marking the highest annual rate of price growth since 2006. Phoenix had the fastest home price growth for the 20th consecutive month, posting a 15.8% year-over-year increase, followed by Seattle at 14.3% & San Diego at 14.2%. The city with the slowest home price growth was Las Vegas, though it was still an impressive 8.5% year-over-year gain. “January’s data remain consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” Craig Lazzara, managing director & global head of index investment strategy at S&P DJI, said. Lazzara noted it is unclear whether the trend will fade as the pandemic is brought under control or if the higher demand will be a permanent shift. The latest data comes as existing home sales fell 6.6% in Feb to a seasonally adjusted annual rate of 6.2M units, according to the National Association of Realtors (NAR). However, existing home sales were still 9% higher in Feb compared with a year ago. Housing inventory reached a record low of 1.03M units as of the end of Feb, a 29.5% year-over-year decline compared to 1.46M units, marking the sharpest yearly drop since NAR began collecting home inventory data in 1982. Higher mortgage rates could slow sales a bit in the coming months, but borrowing costs remain near historic lows. The average rate on a 30-year fixed mortgage rose to nearly 3.2% last week, the highest since Jun, up from 3.1% the week before. That's still below the pre-pandemic rate of 3.5%. According to the Federal Housing Financy Agency's (FHFA) home-price index, nationwide home prices saw a 12% increase compared to a year ago & a 1% uptick month-over-month. The FHFA reported home prices in the Mountain region rose 14.8%, in line with the regional data reported in the Case-Shiller indices.
Home prices see biggest jump since 2014
The IMF is even more optimistic about global growth this year, but has insisted there is still “high uncertainty” ahead. Back in Jan, the IMF struck an upbeat tone in its global economic forecasts, estimating a GDP (gross domestic product) rate of 5.5% this year. At the time, this represented a 0.3 percentage point increase from previous forecasts. However, Pres Biden's massive fiscal plan & an improved vaccine rollout over the past 3 months have made the IMF even more confident about the rest of the year. “We now expect a further acceleration: partly because of additional policy support — including the new fiscal package in the United States; and partly because of the expected vaccine-powered recovery in many advanced economies later this year,” IMF's Managing Director Kristalina Georgieva said. “This allows for an upward revision to our global forecast for this year and for 2022.” The new forecasts will be announced Tues, when the fund releases its latest World Economic Outlook. The rate of coronavirus vaccinations around the world is also picking up pace. Yesterday, Biden said that 90% of adults in the US will be eligible for a Covid-19 vaccine by Apr 19. Meanwhile, the UK plans to have offered the first Covid-19 shot to all of its eligible population by the end of Jul & the EU is expecting to have 70% of the adult population vaccinated this summer. However, the IMF has warned that one of the risks to the outlook is the high uncertainty provoked by the pandemic, including potential new variants. “One of the greatest dangers facing us is extremely high uncertainty,” Georgieva said. At the same time, it has noted that there is an uneven economic recovery taking place. “While the outlook has improved overall, prospects are diverging dangerously not only within nations but also across countries and regions. In fact, what we see is a multi-speed recovery, increasingly powered by two engines — the U.S. and China,” Georgieva added. “They are part of a small group of countries that will be well ahead of their pre-crisis GDP levels by the end of 2021. But they are the exception, not the rule.” As a result, the IMF is advising countries to ramp up vaccine production, distribution & deployment. It also advised they keep loose fiscal policies & invest in climate-friendly policies. “This is how we can protect people’s health — and accelerate the recovery. Faster progress in ending the health crisis could add almost $9 trillion to global GDP by 2025. But the window of opportunity is closing fast. The longer it takes to speed up vaccine production and rollout, the harder it will be to achieve these gains,” Georgieva added.
IMF to raise global growth forecasts on U.S. stimulus and Covid vaccination progressGold futures settled lower for a 2nd session, hit by rising bond yields & strength in the $, with coronavirus vaccine rollouts lifting expectations for higher inflation as economies recover, particularly the US. Gold for Apr fell $28 (1.7%) to settle at $1683 an ounce, after shedding 1.2% in the previous session. Prices based on the most-active contract settled at their lowest since Mar 8. A rise in the 10-year Treasury yield, which pushed as high as 1.778% for the first time since Jan 2020, was credited with weighing on appetite for precious metals, which don't offer a coupon. Yields & bond prices move in opposite directions. Meanwhile, the $ has been perkier amid prospects of a stronger economic recovery from the COVID pandemic & rising bond yields. The $ was up 0.4% at 93.30. Gold has traded inversely to the $ in recent trade, with the currency up 2.7% so far in Mar, while bullion is down 2.7% on the month. Data released today revealed that US consumer confidence rose to 109.7 in Mar, from a revised 90.4 in Feb. Meanwhile, Pres Biden has pledged that 90% of the US population will be eligible for the coronavirus vaccine by Apr 19, fueling further hope of a robust rebound from the pandemic. The US is now giving 2.8M doses daily of COVID-19 vaccine, as the supply increases & states increase eligibility. Some strategists expect Fri's jobs report, when the markets will be closed in observance of Good Friday, to register around 1M jobs for Mar 625K, with range of 439K-1M.
Gold suffers back-to-back declines on bond yield surge, dollar strength
Oil futures settled loweras ships resumed moving thru the Suez Canal & traders turned their attention to a meeting of OPEC & its allies (OPEC+) later this week. Saudi Arabia is likely to urge OPEC+ to extend existing production curbs thru May at the Thurs meeting. West Texas Intermediate crude for May fell $1.01 (1.6%) to settle at $60.55 a barrel. Global benchmark May Brent crude, ahead of the contract's expiration tomorrow, lost 84¢ (1.3%) at $64.14 a barrel. Crude is on track for monthly declines, with WTI down over 1% in the month to date & Brent off less than 1%, though both remain up more than 20% so far this year.
Oil prices settle lower as Suez Canal reopens; focus shifts to OPEC+
Economic data continues to be about as good as could be hoped for & vaccinations are coming along. But higher interest rates are haunting traders & investors. More bond selling is in coming which brings higher interest rates. The Dow looks vulnerable at its present level, above 33K.
Dow Jones Industrials
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