Dow went up 35, advancers slightly ahead of decliners & NAZ added 19. The MLP index stayed close to 255 (basically even) & the REIT index was fractionally lower to the 397s after a strong rebound in the last 2 months, Junk bond funds crawled higher & Treasuries had limited selling, raising yields a little (more below). Oil slid back into the 73s & gold was off 7 to 2085 (but remaining in record high territory).
AMJ (Alerian MLP Index tracking fund)
In the final CNBC's Delivering Alpha Stock Survey poll of the year, the 300 investors, traders & money managers surveyed are behind Jerome Powell & the Federal Reserve. 88% give the Fed an excellent or good score for 2023, that's better than the 77% from the survey 3 months ago. More than ½ believe they'll start cutting rates in the 2nd qtr of 2024. Those surveyed are mostly planning to put their money in the S&P 500, with 28% saying that would be a main target for them in the new year. 16% said they'd mostly be investing in Nasdaq 100 stocks. About 12% said China would have the strongest growth followed by Japanese stocks, high yield bonds, long range US bonds & bitcoin, all coming in 8% apiece. Not one person surveyed said gold would be their favored investment of 2023. The commodity is near record highs & up 15% in 2023. In terms of sectors, 35% said financials would be the winner in the new year with 23% favoring high div stocks. When asked what would do better in 2024, the “Magnificent 7” or the other 493 S&P stocks respondents were firmly behind the Magnificent 7 with 77% saying they'd do better cumulatively than the rest of the S&P 500. Big cap tech is the favorite area for investors looking to invest in AI according to the survey with 58% saying that's where they'd put their money. In case things get rough for the markets, 35% say money markets are the best place to be followed by 31% in US bonds & 19% in plain old cash. Just 7% would choose gold, 4% for crypto & real estate. When it comes to the biggest risks for stocks in 2024, stubborn inflation & problems with commercial real estate ranked highest followed closely by slow growth. War overseas & a more militarily aggressive China scored 11% apiece.
Investors have faith in the Fed in 2024, see bank stock comeback, CNBC survey shows
Pending home sales in Nov were unchanged compared with Oct & 5.2% lower than Nov of last year, according to the National Association of Realtors (NAR). The reading, which is based on signed contracts during the month, is a forward-looking indicator of closed sales as well as the most current look at what potential homebuyers are thinking. Mortgage rates are key in this report, with the average rate on the 30-year fixed mortgage soaring over 8% in mid-Oct before dropping sharply to 7.5% in the first week of Nov, according to Mortgage News Daily. It ended the month around 7.25%. Analysts had expected the drop to cause a slight gain in pending sales, but apparently it wasn't enough, given steep home prices & tight supply. “Although declining mortgage rates did not induce more homebuyers to submit formal contracts in November, it has sparked a surge in interest, as evidenced by a higher number of lockbox openings,” said Lawrence Yun, NAR's chief economist. Mortgage rates are now solidly in the mid-6% range, but the supply of homes for sale is still very low. Builders are ramping up production, but new homes come at a price premium & prices for existing homes continue to rise. “With mortgage rates falling further in December – leading to savings of around $300 per month from the recent cyclical peak in rates – home sales will improve in 2024,” Yun added.
November pending home sales were unchanged, despite sharp drop in mortgage rates
Treasury yields were higher as investors weighed the path ahead for the economy & financial markets as the new year nears. The yield on the 10-year Treasury added more than 3 basis points to 3.826% & the 2-year Treasury yield rose nearly 3 basis points to 4.271%. Yields & prices move in opposite directions & 1 basis point equals 0.01%. The Federal Reserve's monetary policy decisions, & whether the long-anticipated recession will actually hit, remains top of mind for investors as 2024 approaches. Following its last meeting earlier this month, the Fed noted that it expects to cut interest rates 3 times next year & inflation to ease further. Recent economic data has prompted optimism amongst investors about the likelihood of the Fed's expectations for 2024 becoming reality. But questions remain about when these rate cuts will come & whether they will be enough to avoid a recession in the US as interest rates will remain elevated even after the cuts. According to CME Group's FedWatch tool, markets expect the first rate cut at the Fed's Mar meeting, which will be the central bank's 2nd meeting of the year. Jobless claims data out today showed initial filings for unemployment last week move higher, rising 12K from the previous period.
Treasury yields rise as investors consider economic outlook
The Dow is currently up 4500 YTD, for an outstanding year. Meanwhile gold is in record territory & remains in demand by investors with negative thoughts about risky stocks.Dow Jones Industrials
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