Wednesday, July 19, 2023

Markets climb after 7 straight day of gains on earnings optimism

Dow gained 153, advancers over decliners about 2-1 & NAZ gained 67.  The MLP index was up 1+ to the 236s & the REIT index was up 2+ to the 381s.  Junk bond funds crawled higher & Treasuries had modest buying which lowered yields.  Oil went up to the 76s & gold slid back 3 to 1977.

AMJ (Alerian MLP Index tracking fund)


 

 




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Asia-Pacific markets mostly rose today as investors digest better-than-expected results from the NYSE.  Overall, the earnings season was off to a strong start.  Of the S&P 500 companies that have reported, 84% exceeded profit estimates.  In Japan, the Nikkei 225   popped 1.2% & closed at 32,896, while the Topix was up 1.2% to 2278.  Business sentiment among manufacturers in Japan declined for the first time in 6 months in a Jul survey which measures confidence among large Japanese companies.  South Korea’s Kospi rebounded & rose marginally to 2608 & the Kosdaq was up 1.1% to close at 923, its highest level since Apr 2022.  In Australia, the S&P/ASX 200 rebounded from yesterday losses & rose 0.6%, ending the day at 7323.  Australia will see its unemployment figures out tomorrow, seen as critical to the central bank on whether it will continue to hike rates.  Hong Kong's Hang Seng index extended its losses after falling over 2% yesterday, with the index sliding 0.3% in its final hour of trade.  Mainland Chinese markets ended the day mixed, with the Shanghai Composite up marginally & ending at 3198, but the Shenzhen Component closed 0.4% lower at 10,932.  Overnight in the US, all 3 major indices climbed, with the Dow up 1.1% & notching its 7th straight day of gains & its longest winning streak since Mar 2021.  The NAZ climbed 0.8%, while the S&P 500 gained 0.7%.

Asia markets rise as investors digest Wall Street’s strong earnings

New US home construction tumbled in Jun after rising the previous month, the latest sign that challenges within the housing market persist.  Housing starts slid 8% last month to an annual rate of 1.43M units, according to new Commerce Dept data.  That compares to the forecast for a pace of 1.48M units.  In a sign the deep freeze that has paralyzed the housing market for months is not over yet, applications to build, which measures future construction, fell 3.7% over the course of the month to an annualized rate of 1.44M units.  Compared with the same time last year, building permits are down about 15.3%.  "While homebuilders are remaining confident in the market with overall sentiment increasing again in June, the new construction market remains a rocky landscape," said Nicole Bachaud, Zillow senior economist.  "Increasing costs and labor shortages are still impacting builders' ability to meet the demand for new housing."  The data comes one day after the National Association of Home Builders/Wells Fargo Housing Market Index, which measures the pulse of the single-family housing market, rose 1 point to 56, the highest reading since Jun 2022.  Any reading above 50 is considered positive.  Sentiment has been steadily rising as a worsening inventory shortage buoys consumer demand for new homes.  "The lack of resale inventory means prospective home buyers who have not been priced out of the market continue to seek out new construction in greater numbers," said Alicia Huey, NAHB chair & a homebuilder from Alabama.  "At the same time, builders are troubled over rising mortgage rates approaching 7% and continue to grapple with supply-side challenges, including ongoing scarcity of electrical transformer equipment and growing concerns about lot availability."

Housing starts slump in June as building challenges persist

With debt reaching more than $17T & ongoing interest rate increases, many Americans have seen inflation eat away at their incomes, according to a TransUnion survey.  46% of consumers said their incomes did not keep up with the rate of inflation in Q2, TransUnion reported & 38% said their finances were worse than planned by that point.  This marks an increase of 4 percentage points from the previous qtr.  "Inflation has consumers in a recession state of mind," TransUnion added in its report.  When asked if they ranked the following financial stressors as a top-3 concern, this is how respondents answered. 

  • Inflation: 79%
  • Recession: 53%
  • Housing prices: 45%
  • Interest rates: 41%

To address their financial concerns, many Americans said they would turn to credit.  32% of consumers said they plan to apply for new or refinance existing credit in the coming year.  That marked an increase of 3 percentage points from Q1 2023 & a 6 percentage point spike from Q4 2022.  "We are living in uncharted territory from a consumer credit perspective," Charlie Wise, the senior VP & head of global research & consulting at TransUnion, said.  "The combination of rising interest rates and elevated inflation, while not uncommon from a historical perspective, is an unfamiliar experience for many consumers, especially those in the Gen Z and Millennial generations."  "It’s also likely why a number of people are expressing that they feel they are in a personal recession or soon will be in one, with costs rising faster than their incomes," Wise continued.  While inflation remained high & recession fears loomed, America's debt hit a new record.  Total household debt rose to $17T in Q1, according to data released by the New York Federal Reserve.  That brought America's debt balance to $2.9T above where it was at the end of 2019, before the COVID-19 recession.

Nearly half of Americans say income is not keeping up with inflation: TransUnion

Risk averse for stocks has evaporated in the last 2 months.  Investors are eager to buy.  However economic data in the US is mixed to say the least.  And the effects for continued high interest rates have not been seen.  Higher prices feel good but the market's strength will be tested, maybe soon..

Dow Jones Industrials

 






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