Markets continue in demand, led by tech stocks on Nasdaq

Dow finished up 32 in choppy trading, advancers over decliners 2-1 & NAZ advanced 209.  The MLP index slid lower in the 225s & the REIT index was little changed in the 388s following yesterday's big rise.  Junk bond funds inched higher & Treasuries had limited buying.  Oil added 2+ to 89 & gold jumped 16 to 1770, capping an outstanding week (more on both below),

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Higher interest rates, a potential recession & persistently high prices made consumers substantially less confident about the current state of the economy as well as where things are heading, according to a closely watched sentiment gauge.  The University of Michigan Survey of Consumers posted a 54.7 reading for Nov down 8.7% from the previous month’s reading of 59.9.  That was well off the forecast number to be little changed at 59.5.  Along with that reading, the current economic conditions index fell 11.9% to 57.8.  The index of consumer expectations, which looks at where respondents see things heading in 6 months, tumbled 6.2% to 52.7.  On an annual basis, the headline index reading fell 18.8%, while the current conditions measure was off 21.5% & the future expectations measure slid 17%.  The release comes a day after the Bureau of Labor Statistics reported that the consumer price index rose 0.4% in Oct, below the 0.6% estimate.  That news set off a wild rally, where sentiment rang high that the Federal Reserve could ease the pace of interest rate increases as inflation shows signs of leveling off.  The survey noted a particular slide in views on spending for durable goods — big-ticket items such as televisions, kitchen appliances & motor vehicles.  The index for that group fell 21% as consumers were wary of rising borrowing rates & elevated prices.  Durable goods purchases have been on the decline since mid-2021, falling the past 2 qtrs after exploding in the early days of the Covid pandemic.  Inflation expectations edged higher in the month despite Octo's CPI reading, which showed that year-over-year prices rose 7.7%, compared to 8.2% the previous month.  The one-year inflation outlook rose to 5.1%, the highest level since Jul, while the 5-year gauge rose to 3%, the highest since Jun.  Those readings have remained in a tight range for most of the year, starting 2022 respectively at 4.9% & 3.1%.

Despite slower inflation, consumer sentiment weakened in November, survey shows

An increase in blanked, or canceled sailings, from Asia bound for the US is hitting some of the biggest domestic ports hard, including the Port of Long Beach & Port of Savannah, reducing their ability to ship exports.  The decline in vessels coming from Asia on the Transpacific route is creating an increase in the wait time, or dwell time, of export containers at the Port of Long Beach.  Supply chain research firm Project44 tracks exports from “gate-in to loaded on a ship,” said Joshua Brazil, Project44 VP of supply chain insights & that metric hit 18.33 days at the Port of Long Beach, as of yesterday.  “We are projecting 28 blank sailings for Q4, which represents approximately 15% of our quarterly vessel capacity,” said Mario Cordero, exec director of the Port of Long Beach.  “As shipping lines reduce their vessel calls in the form of blank sailings, this reduces the capacity for outbound volumes. That said, we continue to prioritize exports over empties, which is one reason empties are ticking up on terminal.”  Cordero said that the port anticipates loaded imports to continue to taper off for the rest of the calendar year.  Ocean carriers have been increasing the number of canceled sailings in an effort to address the drop in ocean orders as well as to put a floor in ocean freight prices that have been tumbling.

Canceled sailings from China and ‘radical’ vessel cuts hit U.S. ability to reach export market

Mortgage rates fell sharply yesterday after a gov report showed that inflation had cooled in Oct, prompting a decline in bond yields.  The average rate on the 30-year fixed plunged 60 basis points from 7.22% to 6.62%, according to Mortgage News Daily.  That matches the record drop at the start of the Covid 19 pandemic.  The rate, however, is still more than double what it was at the start of this year.  In turn, stocks of homebuilders jumped, along with broader market gains.  Those stocks have been hammered by the sharp increase in rates over the past 6 months.  The Consumer Price Index rose in Oct at a slower pace than expected.  As a result, bond yields dropped sharply & mortgage rates followed, as they follow loosely the yield on the 10-year Treasury.  “This is the best argument to date that rates are done rising, but confirmation requires next month’s CPI to tell the same story,” said Matthew Graham, chief operating officer of Mortgage News Daily.  “This was always about needing two consecutive reports of this nature combined with acknowledgement from the Fed that the inflation narrative is shifting.”  But Graham said rates are not out of the woods yet.  They are also unlikely to move dramatically lower, as there is still plenty of economic uncertainty both in US & global financial markets.

Mortgage rates fall sharply to under 7% after inflation eases

Gold prices marked another finish at their highest since Aug, up more than 5% for the week, as expectations that the Federal Reserve might slow the pace of interest-rate hikes in Dec have helped boost the yellow metal & contributed to a fall in the $ index to an over 2-month low.  Gold futures for Dec rose $15 (0.9%) to settle at $1769 per ounce — the highest finish for an most-active gold contract since Aug 25.  Gold finished higher, largely driven by the US Oct consumer-price index data, which helped stoke expectations that the $ may have reached its peak, or at least is close to it.  The ICE US Dollar Index was down 1.7% at 106.384, for a weekly loss of more than 4%.  The dollar index continued to trade lower after the University of Michigan's gauge of the US consumer's outlook fell 5.2 index points in Nov from 59.9 in Oct.  Inflation expectations for the next year rose to 5.1% from 5% in the prior month, while 5-year inflation expectations rose to 3% from 2.9% in Oct.  Soaring prices are choking the global economic growth, which could also impact demand for metals.  Next week, the focus for gold will turn to growth & retail sales from China & the US & GDP from Eurozone.

Gold settles with a more than 5% weekly gain as the dollar softens to a 2-month low

Oil futures finished higher, lifted by weakness in the $ & moves by China to ease some COVID-19 restrictions, but prices still ended lower for the week on uncertainty surrounding Chinese energy demand.  Confusion on Chinese COVID-19 policy, with the nation's approach clear as mud is driving the market fluctuation in oil.  Still, weakening of the $ & easing of inflation reported this week supported oil prices.  US benchmark West Texas Intermediate crude for Dec rose $2.49 (2.9%) to settle at $88.96 a barrel, with prices based on the front-month contract down 3.9% for the week.

Oil prices end higher for the session, down for the week

This was an unusually wild week for stocks, but they finished with an excellent gain of 1350.  Investors are hoping that the lower inflation rate will slow the rate hikes by the Fed.  Of course they are ignoring the fact that rates are already high by recent standards, making for strong headwinds in the economy.  But the Dow chart below shows a substantial rise of almost 4750 in about 6 weeks.              

Dow Jones Industrials

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