Dow climbed 183, advancers over decliners better than 2-1 & NAZ was up 104. The MLP index added 1+ to the 246s & the REIT index was steady in the 327s after yesterday's rise. Junk bond funds were also in demand & Treasuries saw heavy buying which lowered yields. Oil rebounded 1+ to the 82s & gold was up 3 to 1997.
AMJ (Alerian MLP Index tracking fund)
Hiring by US companies increased less than expected in Oct, the
latest sign that the labor market is starting to cool in the face of
higher interest rates, according to the ADP National Employment Report. Companies added 113K jobs
last month, below the 150K gain that was predicted but higher than the unrevised 89K increase
recorded in Sep. The weaker-than-expected report comes in
the wake of an aggressive tightening campaign by the Federal Reserve,
which has hiked rates to the highest level since 2001. Fed officials,
including Chair Jerome Powell,
have opened the door to at least one more hike this year, & have
signaled that rates will remain elevated for longer as they assess
whether high inflation has retreated for good. In a potentially welcoming sign for the Fed as it tries to wrangle inflation under control, wages continued to moderate in Oct. Annual
pay rose 5.7% last month, the 13th straight month of slowing growth,
according to the report. For workers who switched jobs, wages climbed
8.4%, down from 9% the previous month. "No
single industry dominated hiring this month, and big post-pandemic pay
increases seem to be behind us," said Nela Richardson, ADP chief
economist. "In all, October’s numbers paint a well-rounded jobs picture.
And while the labor market has slowed, it’s still enough to support
strong consumer spending." The education & health services industry drove the biggest job gains
last month, adding 45K new employees. But hiring was largely
broad-based last month & there were also notable gains in other
sectors including leisure & hospitality, financial activities &
trade, transportation & utilities.
Private sector job growth increases less than expected in October: ADP
The Treasury Dept announced plans to accelerate the size of its auctions as it looks to handle its heavy debt load & with financing costs rising. In a development getting close attention, the dept detailed its refunding plans for future debt sales. The announcement comes with Treasury yields around their highest levels since 2007, a reflection of financial markets spooked over how much damage higher borrowing costs could exact. Most immediately, the Treasury will auction $112B in debt next week to refund $102B of notes set to mature Nov 15, raising more than $9B in extra funds. The dept said it will increase the auction size of various maturities, focusing more on coupon-bearing notes & bonds. The Treasury will maintain its current auction size for bills until late Nov, when it expects to have its general account replenished enough to implement “modest reductions” thru mid- to late-Jan. On Mon, the dept said it would need to borrow $776B in the current qtr & $816B in the first qtr of calendar 2024. The auction changes are important to investors because they could provide a window into where yields are heading. Markets have been concerned about whether there will be enough demand to meet the Treasury's needs, which would send yields up even further & possibly cause financial distress. However, most auctions have been fairly well subscribed of late, though yields are still around their highest levels since 2007, the early days of the global financial crisis.
Treasury details plans to step up size of bond sales to manage growing debt load and higher rates
As mortgage rates hover near the highest level in more than 2 decades, homebuyers are turning to riskier mortgage products to help them get into a home. Last week, the average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) decreased to 7.86% from 7.90%, with points falling to 0.73 from 0.77 (including the origination fee) for loans with a 20% down payment, according to the Mortgage Bankers Association (MBA). That is still 80 basis points higher than the same week one year ago. Adjustable-rate mortgages, which are considered riskier because the rates are fixed for shorter terms, offer savings. The average contract interest rate for 5/1 ARMs decreased to 6.77% last week. “As higher rates continue to impact affordability and purchasing power, ARM loans increased almost 10 percent last week and continued to gain share, growing to 10.7 percent of all applications,” said Joel Kan, an MBA economist. The ARM share of mortgage applications is now at the highest level in nearly a year. Overall, mortgage demand, however, continues to slide. Applications to refinance a home loan fell 4% for the week, seasonally adjusted, & were 12% lower than the same week 1 year ago. Applications for a mortgage to purchase a home dropped 1% for the week & were 22% lower year over year. “The impact of higher rates continued to be felt across both purchase er.and refinance markets. Purchase applications decreased to their lowest level since 1995 and refinance applications to the lowest level since January 2023,” Kan added.
Adjustable-rate mortgage demand jumps nearly 10% as buyers struggle to afford housing market
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