Dow slid back 6, decliners over advancers 5-4 & NAZ lost 23. The MLP index was off 2+ to the 246s & the REIT index added 1+ to the 341s. Junk bond funds hardly budged & Treasuries had limited buying, slightly reducing yields. Oil fell another 1+ to the high 75s & gold dropped 14 to 1959.
AMJ (Alerian MLP Index tracking fund)
Mortgage rates saw the biggest one-week drop in over a year last week, causing the first increase in mortgage demand in a month. Total mortgage application volume rose 2.5% last week, compared with the previous week, according to the Mortgage Bankers Association's (MBA) seasonally adjusted index. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726K or less) decreased to 7.61% from 7.86%, with points falling to 0.69 from 0.73 (including the origination fee) for loans with a 20% down payment. “Last week’s decrease in rates was driven by the U.S. Treasury’s issuance update, the Fed striking a dovish tone in the November FOMC statement, and data indicating a slower job market,” said Joel Kan, VP & deputy chief economist at the MBA. Applications to refinance a home loan increased 2% for the week & were 7% lower than the same week one year ago. Mortgage rates are pretty close to where they were at this time last year, so there is not a lot of incentive to refinance. Most homeowners refinanced 2 years ago when rates were hovering near record lows. The vast majority of current homeowners carry mortgages with rates below 4%. Applications for a mortgage to purchase a home rose 3% for the week but were 20% lower than the same week a year ago. The decline in interest rates is still not enough to offset sky-high home prices, which are still rising due to the very low supply of houses for sale. Mortgage rates started the week slightly higher, but this week holds fewer economic events or reports that would influence rates. Last week's combination of the Federal Reserve keeping interest rates unchanged & a lower-than-expected monthly employment report was the perfect storm for the dramatic move lower in rates.
Mortgage rates plunge and demand finally inches back
Even though the Federal Reserve put a break on interest rate hikes in Sep, inflation remains stubbornly high & it may offer close to no relief to the average American dealing with credit card debt, according to data from the Federal Reserve Bank of New York. And the average American has more than $7900 in credit card debt, according to research by Annuity.org. In addition to that debt, interest rates remain high. The average APR on a credit card is 20.7%, according to data from the Federal Reserve Bank of St Louis, up from 14.6% in Aug 2020. However, many Americans have been forced to rely on credit cards more than ever before. Specifically, 38% of Americans said they'd likely need to use a credit card to cover expenses they previously weren't using it for, a survey by Quicken said. "Credit cards are the most prevalent form of household debt and continue to become even more widespread," the NY Fed said. "Consider that there are 70 million more credit card accounts open now than there were in 2019, before the pandemic." And as Americans move deeper into the presidential election season, many see the economy in bad shape & only getting worse. 71% of Americans see the economy as either not so good or poor, a poll from Quinnipiac University said. And the economy was the top concern when deciding who to elect president. "Our research shows an economic divide that is widening among Americans – there is a large group of hard-working people who are still struggling financially," Quicken CEO Eric Dunn said. "I’m troubled by the compounding problems facing this group – many of them are living paycheck to paycheck and relying on credit cards they may not be able to afford. It’s clear that strong financial planning is more important than ever to help Americans break this cycle and start closing the gap."
Fed rate pause offers little relief to Americans buried in credit card debt
The Chinese economy recorded the first period of negative foreign direct investment (FDI) in decades, marking another significant & worrying indicator of Beijing's sluggish post-pandemic recovery. "Conducting business in China is getting increasingly difficult,"
Josh Birenbaum, deputy director for the Center on Economic & Financial
Power at the Foundation for Defense of Democracies, said. "China's economy is unquestionably in rough shape right now," he said, stressing that the FDI numbers "are a big part of that." FDI
for China in Q2 2023 totaled $4.9B, a whopping 87% decrease on
the year & the largest drop since 1998, when comparable data was first
available, Nikkei Asia reported. FDI has dropped more than 50% since Q2
2022, but the latest drop is the lowest FDI has hit on record. The
outflow of investment totaled around $11.8B, according to Axios.
Goldman Sachs analysts suggested "some" of the weakness could have
resulted from "multinational companies repatriating earnings," but
regardless may indicate how quickly expectations about China's growth
have "shifted." China has not regained the kind of financial muscle it was throwing around before the pandemic,
with several issues resulting from the global supply chain crisis
having forced countries to reconsider their reliance on China for
production & trade. The US has made a deliberate effort during the Trump & Biden
administrations to diversify & decrease its reliance on China,
resulting in Canada & Mexico exporting more to the US than China as
of earlier this year.
China records lowest foreign investment on record, experts blame new laws for stifling much-needed growth
The US economy appears to be struggling more than recent data suggests. Making matters worse, the Chinese economy is struggling. As a result, oil prices are falling given cheerless indicators around the the world. 2 major wars add the negative thoughts about the global economy.
Dow Jones Industrials
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