Thursday, December 21, 2023

Markets rebound from substantial selling yesterday

Dow recovered 216, advancers over decliners about 5-1 & NAZ went up 104.  The MLP index rose 2+ to 256 & the REIT index gained 1+ to 591.  Junk bond funds crawled higher & Treasuries hardly budged in price (more below).  Oil slid back chump change to the high 73s & gold added 5 to 2052.

AMJ (Alerian MLP Index tracking fund)

Americans are bracing for a blow to their personal finances in 2024 as they continue to battle stubbornly high prices for necessities like food, rent & medical care.  That's according to a new survey published by Bankrate, which found that nearly 2/3 of consumers, about 63%, do not expect their personal finances to improve in 2024.  That includes 26% who expect their finances to deteriorate & 38% who think their financial situation will remain the same.  Just 37% of Americans expect their finances to improve in the new year.  The pessimism stems from still-high inflation, which was cited as the top obstacle to financial improvement.  Roughly 61% of respondents blamed the ongoing spike in prices for the potential hit to their finances next year.  "[Prices are] still notably higher than just two or three years ago, and that is what households feel," said Greg McBride, chief financial analyst at Bankrate.  "The rate of inflation may be coming down, but prices generally are not."  While inflation has fallen from the highs of mid-2022, many families have yet to see material relief.  The consumer price index is still running well above the typical pre-pandemic rate & the cost of necessities like food, gasoline, rent & child care remain far more expensive than they were just one year ago.  Chronically high prices are forcing Americans to spend about $650 more per month than they did 2 years ago, according to a recent estimate from Moody's Analytics.  Inflation has created severe financial pressures for most households, which are forced to pay more for everyday necessities like food & rent.  The burden is disproportionately borne by low-income Americans, whose already-stretched paychecks are heavily impacted by price fluctuations.  "A staggering 61% of those not expecting their financial situation to improve point to continued high inflation as a culprit — nearly twice that of any other reason," McBride said.  Other commonly cited reasons for the dreary financial outlook include stagnant or reduced income (32%), changing interest rates (22%) & debt (19%).  As they spend more on everyday goods, Americans are burning thru their savings & are increasingly turning to credit cards to cover those basic expenses.

Americans expect their finances to deteriorate in 2024 amid still-high inflation

Sales of new vehicles in the US are expected to increase slightly next year, as the automotive industry continues to normalize from the coronavirus pandemic & other supply chain problems since 2020.  Forecasts from leading automotive data firms are calling for a year-over-year increase of 1-4% to roughly 15.6-16.1M vehicles sold.  Such sales would be the highest since 2019, when more than 17M new cars & trucks were sold domestically.  Since that time, the auto industry has been battling production & supply chain problems sparked by the global Covid health crisis, with sales of less than 14M vehicles, the lowest in more than a decade, in 2022.  Even a small increase in US sales could be good for consumers & the economy.  It would mean more vehicles are being produced, potentially easing recent affordability concerns amid inflation, high interest rates & record high new vehicle prices.  “While the year ahead holds the promise of further increased inventory and enticing deals that consumers have eagerly awaited, 2023′s high interest rates are expected to linger, provoking conflicting market dynamics.” said Jessica Caldwell, Edmunds' head of insights.  Edmunds believes new vehicle pricing power for automakers has peaked, as improved inventory has driven incentives back into the market.  For investors, increased sales are good, but lower prices & rising incentives are expected to be headwinds for many automakers & dealers that have produced record profits in recent years.  “Automakers specifically will weigh one other key consideration in 2024: Are they satisfied with this newly established supply-demand equilibrium, or are they willing and able to push sales volumes closer to prepandemic norms?” Caldwell added.  The expected US growth compares with a 2.8% year-over-year increase in auto sales globally forecast by S&P Global Mobility.  “2024 is expected to be another year of cagey recovery, with the auto industry moving beyond clear supply-side risks, into a murkier macro-led demand environment,” said Colin Couchman, exec director of global light vehicle forecasting at S&P Global Mobility.  S&P's US sales forecast is among the highest.  It expects sales to reach 15.9M units in 2024, an estimated increase of roughly 2% from projected sales of 15.5M units in 2023.  GlobalData, which acquired LMC Automotive, is forecasting a nearly 4% increase in US new vehicle sales to 16.1M units.  Edmunds expects 15.7M new cars & trucks to be sold in 2024.  That would be a roughly 1% uptick from an estimated 15.5M cars & trucks sold in 2023.  At the low end, Cox Automotive expects 15.6M vehicle sales, driven largely by an increase in fleet or commercial sales.  Retail sales are expected to be “mostly flat,” according to Cox.

New car sales are expected to rise slightly next year in the U.S.

The 10-year Treasury yield fell as investors continued to assess the path of future rate cuts from the Federal Reserve.  The yield on the benchmark 10-year Treasury note dropped 4 basis points to 3.836%, the lowest level since Jul 24 when the 10-year yielded as low as 3.792%.  The yield on the 30-year Treasury bond dipped 2 basis points to 3.982%, while the 2-year yield was lower by 5 basis points 4.316%.  Yields move inversely to prices.  The 3rd estimate of real GDP came in lower than expected.  Real GDP rose 4.9% on an annual basis in the 3rd qtr, according to the Bureau of Economic Analysis.  That's down from the 2nd estimate’s increase of 5.2% & lower than the rise of 5.1% expected.  Initial jobless claims were little changed week over week & below, as the labor market continues to show strength.  There were 205K initial unemployment claims last week, up 2K from the previous period, according to the Dept of Labor.  The forecast was expecting 215K claims.  10-year Treasury yields have declined by almost a percentage point since the end of Oct on rising expectations that the Fed will begin cutting rates as soon as Mar.

10-year Treasury yield falls as investors assess path for rate cuts

The bulls have returned & they want to keep taking the market higher even though the background economic data is only so-so at best.  Many Americans are not feeling the benefits from higher stock prices.  With the bulls in command, the rest of the year could extend the stock market's rally.

Dow Jones Industrials 

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