Dow finished 36 higher, advancers ahead of decliners 5-4 & NAZ went up 53. The MLP index drifted 1 lower to the 286s & the REIT index added 1+ to the 374s. Junk bond funds remained mixed & Treasuries had limited buying which reduced yields slightly. Oil was up nearly 1 to the high 81s & gold jumped 21 to 2334 (more on both below).
Dow Jones Industrials
US consumer confidence teetered slightly in Jun as Americans grew a little warier about the future. The Conference Board's latest consumer confidence index dipped to 100.4 in Jun from a downwardly revised level of 101.3 in May. Jun's reading landed in line with what was expected but reinforced what's become a running theme: Despite continued economic growth & a historically strong labor market, Americans say their confidence has grown increasingly threadbare after a prolonged stint of high inflation & interest rates. Measurements of Americans' confidence are typically closely watched, as consumer spending accounts for nearly 70% of US economic activity. But that significance is even more heightened now with the presidential election just months away. The Conference Board's latest report showed that Americans felt better about the labor market, which outweighed concerns about the future. However, consumers' feelings on current business conditions cooled, noted Dana Peterson, chief economist of the business membership & research organization. “However, if material weaknesses in the labor market appear, confidence could weaken as the year progresses,” she said. Consumers felt different levels of confidence around different parts of the economy. The present situations index ticked up to 141.5 (its highest level since Mar) from 140.8; however, the expectations index dropped to 73, marking the 5th consecutive month below 80, which the Conference Board considers as a threshold signaling a recession is ahead. The expectations index has been at or above that potential recession threshold only 6 months since Mar 2022, when escalating inflation forced the Federal Reserve to start a historic rate-tightening campaign. Inflation has cooled considerably during the past 2 years but is still above the central bank's 2% target & interest rates remain at a 23-year high which have helped to tamp down demand.
Americans felt shakier about the economy in June
Mortgage rates were mixed this week with the standard 30-year note declining slightly for the 4th consecutive reading, while shorter-term rates ticked up a bit. Freddie Mac's latest Primary Mortgage Market Survey, showed that the average rate on the benchmark 30-year fixed mortgage ticked down to 6.86% this week from 6.87% last week. The average rate on a 30-year loan was 6.71% a year ago. The average rate on the 15-year fixed mortgage, on the other hand, actually increased to 6.16% from 6.13% last week. 1 year ago, the rate on the 15-year fixed note averaged 6.06%.
Mortgage rates fall slightly to 6.86%
Some of the heat is coming out of home prices, even though they're still higher than they were a year ago. Several new reports show the price gains are shrinking & home sellers are starting to give in after a stagnant spring market. For the first time since the start of the Covid-19 pandemic, when home sales ground to a halt, the typical house sold for slightly less than its asking price, 0.3% lower, during the 4 weeks ended Jun 23, according to real estate brokerage Redfin. A year ago at that time the typical home was selling at list price & 2 years ago it was selling at about 2% above list price. That's not to say that the housing market is crashing. A little less than 2/3 of homes still sold over asking price in the last month; that is, however, the lowest share since Jun 2020. While most sellers are still listing their homes at higher prices than comparable homes sold for a year ago, some are conceding that they simply can't command those prices. Mortgage rates remain stubbornly high, with the average rate on the 30-year fixed mortgage stuck just above 7% for the 3rd straight month, according to Mortgage News Daily. The much-watched S&P Case-Shiller index showed home prices in Apr up 6.3% from Apr 2023. May's prices continue that trend. Home prices are now 47% higher than they were in early 2020, with the median sale price now 5 times the median household income. A different index by ICE Mortgage Technology shows annual home price growth slipped to 4.6% in May from 5.3% in Apr, the slowest growth rate in 7 months. Supply is starting to build, which is leading to the cooling in prices. Total active listings are now 35% higher than they were at this time a year ago, according to Realtor.com. To put that in perspective, however, even after the recent growth, inventory is still down more than 30% from typical pre-pandemic levels. “Some buyers think they can get a deal because they’re hearing the market is cool, and some sellers think every home will sell for top dollar no matter the condition,” said Marije Kruythoff, a Los Angeles Redfin agent. “In reality, everything depends on the house and the location.”
Home prices begin to cool as active listings jump 35%
Gold prices rose 1% from an over 2-week low hit in the previous session as the $ softened, with the market spotlight on key US inflation data for more cues on the Federal Reserve's interest rate path. Spot gold was up 1.2%, at 2324 per ounce after falling to its lowest level since Jun 10 yesterday. US gold futures settled 1% higher, at $2336. Some of the data that came out was supportive to the gold market. It was essentially the wholesale inventories that came in lower than expected. The final GDP figure is significantly lower & gold futures are getting a boost on $ index coming off. Ebbing economic momentum was underscored by data showing business spending on equipment declined in May, while a slump in exports pushed up the goods trade deficit. In its 3rd estimate of Gross domestic product (GDP) for the Jan-Mar qtr, the gov confirmed that economic growth moderated sharply in the first qtr.
Gold Gains 1% on Dollar Weakness as Eyes Turn to U.S. PCE Data
West Texas Intermediate (WTI) crude oil closed higher as traders continue to bet on solid summer demand even as US inventories of oil & gasoline rose last week, while Mideast tensions are rising again. WTI crude oil for Aug closed up 84¢ to settle at $81.74 per barrel, while Aug Brent crude, the global benchmark, was last seen up 80¢ to $86.05. The rise comes even after the Energy Information Administration reported US oil inventories climbed by 3.6M barrels, while the estimate called for a drop of 2.8M barrels & the 5-year average draw for the week is 6.3M barrels. Gasoline inventories rose by 2.7M barrels, against expectations for a 1M barrel draw. An unexpected rise in US crude stockpiles while implied demand for the 3 main fuels (gasoline, diesel & aviation fuels) fell for the first time in 2 months. Despite the weak demand, geopolitical risk is offering support for the market as Israel continues to carry out its war against Hamas in Gaza while increasing its conflict with the Iran-backed Hezbollah militant group in Lebanon.
WTI Oil Closes Higher on Demand Hopes and Geopolitical Tensions
Bullishness around AI
has helped lift the stock market this year. But
concerns are growing that the rally could be at risk if the handful of
tech companies driving most of those gains stop topping already lofty
expectations. Meanwhile investors are weighing new economic data & waiting for tomorrow's PCI data. While it's not expected to solve economic problems, it could make investors feel better about the future. Amid all this uncertainty, demand for gold continues to be strong.
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