Dow gained 53 with a little selling into the close, decliners slightly over advancers & NAZ slipped back 4. The MLP index stayed close to 255 & the REIT index was up 1+ to the 399s. Junk bond funds were mixed & Treasuries had more selling which increased yields. Oil was off 2+ to 72 as some companies are using the Red Sea again & gold dropped 14 to 2078 after its recent run (more on both below).
AMJ (Alerian MLP Index tracking fund)
Mortgage rates marched down again this week in a hopeful sign for prospective buyers, but flat pending home sales indicate the recent declines have so far not been sufficient to get the housing market moving again. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate for the benchmark 30-year fixed mortgage fell to 6.61% this week, down from 6.67% last week but still higher than 6.42% a year ago. At the same time, the rate on the 15-year fixed mortgage fell nearly a full point, averaging 5.93% after coming in last week at 6.95%. One year ago, the rate on the 15-year fixed note averaged 5.68%. Meanwhile, the National Association of Realtors' latest index of pending home sales showed contracts to purchase previously-owned homes held steady at a record low in Nov. The forecast expected a rise of 1% from Oct's reading of 71.4, which was the lowest recorded since the index was created in 2001, reflecting the damage that inflation, high mortgage rates & a shortage of supply have inflicted on the housing market. However, the Commerce Dept reported housing starts surged 14.8% last month, signaling progress in the stagnant market. "Buyers over the last year have gravitated toward new construction as existing home supply has remained limited and builders are willing to incentivize purchases with lower rates," said Realtor.com chief economist Danielle Hale. "Today’s data signal that home sales activity could register better than expected in Realtor.com’s 2024 Housing Forecast if mortgage rates are able to hold on to the improvement garnered in the last two months, which has been faster than anticipated," Hale added. She continued, "With home prices likely to remain high, mortgage rates will be an important determinant of both affordability and overall activity."
Mortgage rates drop again, but pending home sales stall
The number of Americans filing initial claims for unemployment benefits rose last week, indicating the labor market continues to cool in the year's 4th qtr. New state unemployment benefit claims rose by 12K last week to 218K, according to the Labor Dept. The forecast called for an increase to 210K initial claims. The rolls of those receiving benefits after one week of aid rose 14K from the week prior, reaching 1.87M. Continued unemployment claims, a measure for hiring, have increased since mid-Sep, indicating those already out of work may be having difficulties getting a job. In Nov's economy, 199K new jobs emerged, up from 150K in Oct according to the Labor Dept's non-farm payrolls report. The unemployment rate also fell moderately from the month prior, to 3.7% from 3.9%. Amid slower job growth & milder inflation, the Federal Reserve has left its benchmark interest rate unchanged for 3 consecutive policy meetings & it is expected that its rate hike campaign to be at an end.
New US jobless claims rise again as labor market cools
Israeli tanks advanced deep into a town in the central Gaza Strip after days of relentless bombardment that forced tens of thousands of already displaced Palestinian families to flee in a new exodus. A Palestinian journalist posted pictures of Israeli tanks near a mosque in a built-up area of Bureij, the armored contingent having apparently advanced from orchards on the eastern outskirts. Further south, Israeli forces struck the area around a hospital in the heart of Khan Younis, the Gaza Strip’s main southern city, where residents feared a new ground push into territory crowded with families made homeless in 12 weeks of war. An Israeli air strike later today killed 20 Palestinians & wounded 55 in Rafah, a major town near Gaza's southern border with Egypt, Gaza health ministry spokesman Ashraf Al-Qidra said. The building that was hit was housing displaced civilians, according to local medics & residents. Palestinian health authorities said earlier that 210 people were confirmed killed in Israeli strikes in the past 24 hours, raising the toll of Palestinians killed in the war so far to 21K, nearly 1% of Gaza's population. Thousands more dead are feared to be buried or lost in the ruins. Over the course of the war, the Israeli military has expressed regret for civilian deaths but it blames Hamas for operating in densely populated areas & using civilians as human shields, a charge the group denies. Israel has escalated its ground offensive in Gaza sharply since just before Christmas despite public pleas from its closest ally the US to scale the campaign down in the closing weeks of the year. It launched the war to destroy the militant Islamist Hamas movement that runs Gaza after fighters rampaged thru Israeli towns in a cross-border raid on Oct 7, killing 1200 people & taking about 240 hostages. Of the hostages, 110 were freed during a short truce in late Nov & another 23 have now been declared dead in absentia, an Israeli gov spokesperson said. The main focus of fighting is now in central areas south of the wetlands that bisect the narrow coastal strip, where Israeli forces have ordered civilians out over the past several days as their tanks close in.
Israeli tanks push deep into central Gaza town, air strike kills 20 in south
Gold held gains after a 4-day rally as strong demand for Treasuries signaled investors are confident the Federal Reserve will loosen monetary policy next year. US bonds rallied yesterday, dragging down yields to levels not seen in months, on growing expectations that inflation will keep decelerating to a level low enough to coax the Fed into soon slashing interest rates. Falling yields also drove the $ lower, boosting the appeal of commodities priced in the currency. Swaps markets are pricing in about an 84% chance of a cut by Mar. Lower yields & rates are usually bullish for non-interest bearing assets like gold. The precious metal is up about 14% in 2023, on track for its first annual increase in 3 years. Gold was little changed at $2077 an ounce. The Bloomberg Dollar Spot Index fell for a 5th day, losing 0.3% to the lowest level in 5 months.
Gold Holds Gains as Bond Markets Rally on Rate-Cut Optimism
Oil prices fell around 1% as concerns eased about shipping disruptions along the Red Sea route, even as tensions in the Middle East continue to fester. Front month Feb Brent crude futures were down 90¢ (1.1%) at $78.75 a barrel in subdued trade ahead of their imminent expiry, while the more active Mar contract was down 69¢ (0.9%) at $78.85 a barrel. US WTI crude futures were trading 80¢ (1.1%) lower at $73.31 a barrel. Oil prices dropped nearly 2% yesterday as major shipping firms began returning to the Red Sea. Denmark's Maersk will route almost all container vessels sailing between Asia & Europe thru the Suez Canal from now on while diverting only a handful around Africa, a breakdown of the group's schedule showed. Major shipping companies, including container giants Maersk & Hapag-Lloyd, stopped using Red Sea routes & the Suez Canal earlier this month after Yemen's Houthi militant group began targeting vessels, disrupting global trade. However, a US-led coalition to quell tensions in the Red Sea has not so far yielded coordinated action as hoped.
Oil Prices Slide as Red Sea Transport Disruptions Ease
Trading is subdued with some traders starting their long holiday early. Stocks have had a very good year but 2024 will begin with a vastly overbought market. There are still numerous problems starting with the southern border disaster, elevated high interest rates that will linger, continuing federal budget deficits, out of control crime & 2 gov shutdowns looming. For the time being, the bulls are still in charge of the stock market.Dow Jones Industrials
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