Wednesday, October 26, 2022

Markets hesitate after tech results disappoint

Dow gained 311, advancers over decliners better than 4-1 but NAZ fell 19.  The MLP index was up 1+ to the 222s & the REIT index rose 1+ to the 363s.  Junk bond funds inched higher & Treasuries are purchased again, taking yields lower (more below).  Oil went up 2+ to the 89s & gold added 14 to 1672.

AMJ (Alerian MLP index tracking fund)


 

 




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The continued rise in mortgage rates is putting a wet blanket over several areas of the mortgage market.  Requests for mortgage applications declined 1.7% from the prior week, according to the weekly survey by the Mortgage Banker's Association (MBA).  "Mortgage rates increased for the 10th consecutive week, with the 30-year fixed rate reaching 7.16 percent, the highest rate since 2001," said Joel Kan, MBA's VP & deputy chief economist.  "The ongoing trend of rising mortgage rates continues to depress mortgage application activity, which remained at its slowest pace since 1997," continued Kan.  The higher rates for loans are affecting other parts of the mortgage market as well.    The Refinance Index increased fractionally from the previous week.  "Refinance applications were essentially unchanged, but purchase applications declined 2 percent to the slowest pace since 2015 – over 40 percent behind last year’s pace," added Kan.

Mortgage activity hits slowest pace in more than two decades

Treasury yields fell again, as markets absorbed housing sector data & paid close attention to earnings reports, scanning the numbers for hints about a looming recession.  The 10-year Treasury yield was last down by close to 8 basis points to 4.03%.  The benchmark note has come off the 14 year highs it was trading around just last week, when it soared as high as 4.3%.  The yield on the policy sensitive 2-year Treasury was last at 4.427%, having declined by about 4 basis points.  Yields & price move in opposite directions & one basis point equals 0.01%.  Investors absorbed US new home sales data for Sep, which fell 10.9% in Sep from the prior month to a seasonally adjusted annualized rate of 603K units, according to the Commerce Dept.  It was better than the expected 13.4% decline to 593K units.  In Aug, the figure had hit a 5-month high, coming in above market expectations.  However, data published last week showed existing home sales had declined in Sep.  Talks about a housing recession have been spreading as the sector is highly sensitive to interest rates.

Treasury yields fall as traders absorb key housing data

Shares of Microsoft (MSFT), a Dow stock, dropped after the company released its fiscal 1st-qtr earnings.  MSFT surpassed expectations on the top & bottom lines, but the stock was pressured by weak guidance & cloud revenue that missed expectations.  The Intelligent Cloud business segment, which includes the Azure public cloud, as well as Windows Server, SQL Server, Nuance & Enterprise Services, generated $20.3B in quarterly revenue.  That's up 20% but slightly less than the $20.4B estimate.  MSFT expects to see $52.35-53.35B in revenue for the fiscal 2nd qtr, which implies 2% growth at the middle of the range.  Analysts polled had been looking for revenue of $56B.  CEO Satya Nadella said that cyclical trends are affecting its consumer business.  CFO Amy Hood said weak demand for PCs in Sep will continue to hit the consumer segment & added to expect a percentage decline in the high 30s for Windows revenue from devices makers in the fiscal 2nd qtr.  The stock sank 14+ (6%).
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Microsoft shares sink more than 8% on weak guidance, but analysts bullish on rebound

After a sluggish opening, buyers are back.  However, big name tech stocks are not reporting impressive results.  Again after a weak start tech heavy NAZ is pretty much even for today.  But longer term, NAZ is down 4600 YTD.

Dow Jones Industrials

 






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