Dow finished up 47, advancers over decliners 2-1 & NAZ rose 144. The MLP index added 1+ to the 271s & the REIT index went up 4+ to the 383s. Junk bond funds continued to be in demand & Treasuries were higher, reducing yields. Oil was fractionally lower to 78 & gold added 10 to 2053 (more on both below).
AMJ (Alerian MLP Index tracking fund)
The number of Americans filing for unemployment benefits rose more than expected last week as high-profile companies continue to announce major job cuts. The Labor Dept weekly jobless report shows initial claims last week jumped by 13K to 215K, above the 210K estimate. However, that is slightly below the 2019 pre-pandemic average of 218K claims. Continuing claims, filed by Americans who are consecutively receiving unemployment benefits, hit 1.9M in the prior week, up 45K from the previous week & the highest level since Nov. The labor market has remained historically tight over the past year, defying expectations for a slowdown. Economists anticipate the labor market will continue to slow in coming months as higher interest rates work their way thru the economy. The Federal Reserve raised interest rates 11 times beginning in Mar 2022 in an effort to rein in inflation & cool the labor market. Policymakers have suggested that fast wage growth, the product of a strong labor market, was a contributing factor to the inflation crisis that ravaged Ms of Americans' pocketbooks over the past few years. There are growing signs the labor market is beginning to weaken in the face of higher interest rates & stubborn inflation. There has been a wave of notable layoffs since the start of the new year, & the list grows longer by the day. Still, job growth unexpectedly surged at the start of the year as employers added a whopping 353K new jobs & the unemployment rate also held steady at 3.7%. The surprisingly strong report painted a picture of a job market that has gone largely unscathed despite higher interest rates, but it also diminished the odds of an imminent rate cut.
Jobless claims jumped more than expected last week
Mortgage rates continue to march higher, climbing again for the 4th consecutive week. Freddie Mac's latest Primary Mortgage Market Survey showed that the average rate on the benchmark 30-year fixed mortgage climbed to 6.94% this week, up from 6.90% last week. The average rate on a 30-year loan was 6.65% a year ago. But the average rate on the 15-year fixed mortgage fell a bit to 6.26% after coming in last week at 6.29%. One year ago, the rate on the 15-year fixed note averaged 5.89%. "The recent boomerang in rates has dampened already tentative homebuyer momentum as we approach the spring, a historically busy season for homebuying," Freddie Mac chief economist Sam Khater said. "While sales of newly built homes are trending in a positive direction, higher rates and elevated prices continue to pose affordability challenges that may leave potential homebuyers on the sidelines," Khater added. Buying activity tends to pick up in the spring following slower winter months, but elevated rates & sky-high home prices have stalled the housing market as more would-be buyers & sellers are priced out or opting not to move. Housing demand has ground to a halt as rates move higher. Applications for a mortgage to purchase a home dropped 5% from last week, the Mortgage Bankers Association reported. Application volume is down 12% compared with the same time last year.
Mortgage rates climb for fourth straight week
Former Federal Reserve Bank of St Louis Pres & CEO James
Bullard explained how Personal Consumption Expenditures (PCE) got its
reputation & why it's here to stay. "Alan Greenspan in the 90s did a
review of all the different ways to measure inflation, and the outcome
of that was that the personal consumption expenditures was viewed as a
broader measure of inflation and, maybe, a better signal of the overall inflation picture," Bullard said. "And ever since then, there hasn't been another review," he continued. The PCE rose again in Jan as the Fed continues to grapple with the country's fluctuating economy. The personal consumption expenditures (PCE) index showed that
consumer prices rose 0.3% from the previous month, according to the Labor Dept. On an annual basis, prices climbed 2.4%, down slightly from the 2.6% reading recorded the previous month. Speculation has been swirling around the Fed as experts are trying to pinpoint when the central bank will eventually start cutting rates. "I think if you're sitting on the committee and the
economy looks like it's been rebounding here some and inflation seems to
be coming down, but maybe not as fast as you thought. Why do anything?
Why not just sit where you are?," Bullard said. He went on to add that as inflation comes down, the Fed will "have to get to a lower value of the policy rate." "But exactly when the committee will get to that is what everyone's arguing about," Bullard stressed.
Fed is ‘stuck’ in Greenspan era, former St. Louis Fed president says
Gold closed at a 4-week high as a key US inflation measure showed price increases slowed last month, pushing treasury yields down on hopes US interest rates will soon be lowered. Gold for Apr closed up $12 to settle at $2054 per ounce, the highest since Feb 1. The US personal consumption expenditures index (PCE), the Federal Reserve's preferred inflation measure, rose by 2.4% annualized in Jan, down from 2.6% in Dec & in line with expectations. Core PCE rose 2.8% annualized, down from 2.9% a month earlier & also matching the consensus forecast. The result is likely to spur expectations for lower interest rates as inflation falls closer to the Fed's 2% target, though central bank officials have indicated they want to see inflation drop further before cutting rates. The $ fell following the release of the data, making gold more affordable for intl buyers. The ICE dollar index was last seen down 0.15 points & Treasury yields were also lower on hopes lower interest rates are on the way. The 2-year note was last seen paying 4.646%, down 0.5 basis points, while the yield on the 10-year note was down 0.7 basis points to 4.259%.
Gold Rises as a Key US Inflation Measure Fell in January, Sending Yields Lower
West Texas Intermediate (WTI) crude oil closed lower as a key US inflation measure fell more than expected last month. WTI crude for Apr closed down 28¢ to settle at $78.86 per barrel, while Apr Brent crude, the global benchmark, was last seen down 3¢ to $83.65. The US personal consumption expenditures index (PCE), the Federal Reserve's preferred inflation measure, rose by 2.4% annualized in Jan, down from 2.6% in Dec & in line with expectations. Core PCE rose 2.8% annualized, down from 2.9% a month earlier & also matching the consensus forecast. The result is likely to spur expectations for lower interest rates as inflation falls closer to the Fed's 2% target, though central bank officials have indicated they want to see inflation drop further before cutting rates.
WTI Crude Oil Closes Lower as a Key US Inflation Measure Shows a Drop in Line With Expectations in January
Dow began trading today with a solid gain. Then it went flat until the end when there was late day buying. In Feb Dow was up 846 & YTD had a 1310 gain. However there is more talk of a coming recession as layoff announcements from major companies continue.
Dow Jones Industrials
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